Costco Chief Financial Officer Richard Galanti said he believes the country is bumping up against a recession, and the signs are coming from what customers are purchasing.
Galanti says this isn’t the first time he has seen a relation between what products are moving and a looming economic crisis, and right now, shoppers are buying less expensive pork and chicken instead of meat, according to reporting from Yahoo Finance.
Galanti says he is also seeing more canned meat and fish leaving the shelves, indicating shoppers are purchasing items that cost less and can be put in a pantry for an extended period of time. Long periods of inflation cause consumers to stock heavy on non-perishable items so they can stretch their budgets.
The United States Federal Reserve just released a report that revealed 64% of Americans are now buying cheaper versions of products, and another 66% said they are using less of specific products or eliminating them entirely.
Both Costco and Target released sluggish financial earnings during the first quarter of 2023, and executives at those companies are claiming that a decline in big-money purchases is the reason behind those earnings. Shoppers are putting more of their budget into the essentials like groceries, which has led to an increase in sales from private-label brands. Costco posted a sales increase of just 2% in Q1, with revenue hitting $53.65 billion. The gains missed analyst expectations of $54.58 billion.
During its quarterly financial results call in mid-May, Target announced slight increases in total sales (up .5% compared to a year ago) and sales at stores open for at least one year (.7%). Profits (down 5.8%) took a dive. Food and beverage sales, however, were up in the high single digits in Q1.
Still, the preference has been to purchase more private-label products. According to data provided to PLMA by Circana (formerly IRI and NPD), store brands experienced double-digit sales increases and greater market share in both dollars and units during the first quarter of 2023. More specifically, across all U.S. grocery channels, store brand dollar volume jumped 10.3%, which was nearly twice the gain of national brands (which grew 5.6%), compared to the same three-month period a year ago. Dollar share rose to 19.1% and unit share advanced to 20.8%.
Among the 17 food and non-food departments Circana tracks for PLMA, 15 saw increased store brand dollar sales during the first quarter.