Is Costco stock a safe bet as a slowdown in consumer spending weighs on sales?

Costco Wholesale Corporation (NASDAQ: COST) ended in the red on Thursday after reporting its first decline in monthly same-store sales in about three years.

Analyst reacts to Costco’s monthly sales data

Costco noted a 1.1% hit to its same-store sales in March as consumers turned more cautious in terms of spending, as per the press release.

The weakness in its numbers made Michael Baker (D. A. Davidson analyst) reiterate his “hold” rating on the stock. On CNBC’s “Squawk on the Street”, he said:

We’re seeing a bit of a slowdown in spending. That’s impacting their numbers. At 33 times earnings, it’s just not very forgiving. So, I love the company, don’t love the stock here.

The retailer is expected to earn $3.36 a share in its current financial quarter versus $3.17 per share a year ago. Costco stock is up 7.0% year-to-date at writing.

Memberships have been a bright spot for Costco

According to the D. A. Davidson analyst, the recent bank failures will continue to weigh on consumer spending moving forward. Tax refund data, he added, also sits at its weakest level in over a decade.

Baker expects the said weakness in consumer spending to make Costco delay the increase in its membership fee. On the plus side, though, he noted that memberships have remained resilient so far.

Costco had a weak number but a positive number today so this isn’t an all disaster. Memberships been pretty strong, consistent. If that does weaken, we would put it in disaster camp. But we’re not seeing that yet.

Costco stock currently pays a dividend of well under 1.0% only.