What happened
Shares of Costco (COST 1.01%) were heading lower today, even as the broad market jumped, overcoming an initial sell-off on a hotter-than-expected September jobs report this morning. The culprit sending Costco shares lower today seemed to be the same one that hit Coca-Cola and Pepsico yesterday.
Investors are fearful that weight-loss drugs like Ozempic are impacting grocery sales. In fact, a Walmart exec told Bloomberg that it was starting to notice an impact from the drugs in an interview published yesterday.
As of 11:49 a.m. ET, Costco was down 3.1%, while Walmart had fallen 3.2% at the same time, and other consumer staples stocks were down, as well.
Image source: Costco.
So what
Costco makes a majority of its sales from groceries, so it's not necessarily surprising to see that the retailer might be sensitive to fears that grocery sales could be challenged.
The other major news item today was the strong September jobs report, showing the U.S. economy added 336,000 jobs last month and that the unemployment rate remained flat at 3.8%. Treasury yields rose on the news, which seemed to impact dividend stocks as it makes bonds more attractive by comparison. However, Costco is a low-yielding dividend stock, though it has a history of distributing generous special dividends.
The jobs report alone seems an unlikely cause for the blue chip stock to fall 3%.
Now what
Costco is viewed as one of the more bulletproof stocks on the market, and rightfully so. Most of its sales come from necessities like groceries, and its membership model also anchors the business in a way that most retailers don't have. The stock is also expensive, trading at a price-to-earnings ratio of 39, so it's vulnerable to a sell-off, especially if macro-level circumstances change.
It seems too early to determine the impact of drugs like Ozempic on the food and beverage industry, but it's definitely an issue Costco investors should follow. Today's reaction is also a reminder that even so-called "safe stocks" like Costco can have unseen risks.
