What happened
Shares of Costco Wholesale (COST 1.57%) were moving higher today after the warehouse retailer posted strong results in its December comparable sales report.
The update assured investors that a slowdown in November may have just been temporary and showed the company delivered strong results for the holiday season.
As of 10:37 a.m. ET, the stock was up 7.3%.
So what
Costco's December update seemed to quiet bears who saw the company succumbing to recessionary headwinds.
Revenue in the five weeks ended Jan. 1 rose 7% to $22.24 billion, and comparable sales adjusted for fuel and currency exchange were up 7.3%, an improvement from the 5.3% adjusted comp it reported in November.
Adjusted comparable sales in the U.S. also came in at 6.4%, improving from the 4.6% rate the company reported in November.
Stocks rose broadly after the December jobs report showed employment growth slowing and wage increases coming in below estimates as hourly earnings were up 4.6%.
That shows that the Federal Reserve's interest rate hikes may be starting to have their desired effect in slowing down the economy and bringing inflation to heel. The faster wage growth slows, the more likely it is the Fed will stop raising rates, which is good news for stocks.
Now what
Costco's report also offers some indication that consumer spending remained strong in December as the company is the biggest retailer in the U.S. after Walmart and Amazon.
Even if a recession does occur, Costco is well positioned as most of its profit comes from its membership income and its bargain prices on bulk goods attract consumers in lean times.
Though the stock is expensive for a brick-and-mortar retailer, the December results show why Costco deserves to trade at a premium.
