A Costco Whole Foods is losing cash and is losing market share, a major analyst has said, highlighting concerns that the retailer’s stock is on the cusp of a “collapse.”
Costco has been buffeted by rising competition, rising food prices, the death of a longtime co-owner, a new store opening and a shakeup of the retail chain’s headquarters in San Jose, California.
Analysts have been warning for years that Costco’s share price was near collapse, and that its stock was poised for a full-blown stock market correction.
But Costco’s chief executive, Gary Sacks, has insisted the company was well on its way to profitability, despite a recent dip in profits and the loss of some stores.
Analytics firm IBISWorld estimates that Costco has lost $2.6 billion in its last two quarters, which is nearly double the $1.9 billion in the same period last year.
The analysts surveyed by The Wall Street Journal said Costco is in a “very precarious situation” given a strong dollar and rising food costs.
“In the current economic environment, Costco is facing severe cash and stock pressure as the price of commodities is already exceeding that of other retailers,” IBISworld said.
The Costco chief executive said in a statement that he is committed to a plan to achieve profitability by 2019, while the analysts were “not expecting a turnaround in the foreseeable future.”
The analysts also cited Costco’s ongoing “corporate governance issues,” which they said would result in its board not approving any of the proposed strategic plan for 2019.
They said Costco would likely have to slash more than $4 billion in costs by 2019.
The analysts have also been concerned about the chain’s ability to sell more than a million pounds of groceries in the next two years, given a drop in grocery shopping and other sales.IBISWorld said Costco’s stock could fall to $30 a share by the end of 2019.