Sam’s Club, the Walmart-owned purveyor of bulk toilet paper and ketchup, had a terrible last few months, the company announced Thursday. Meanwhile its competitor Costco is doing just fine.
Sales at Sam's Club stores open for a year or more fell 0.5 percent from a year ago in the just-ended fiscal first quarter, the company announced Thursday. The poor results come a few months after the chain laid off 2,300 workers.
Costco, in comparison, recently took home $457 million in profits, even as its quarterly results disappointed Wall Street expectations.
"The divergence from Costco is striking, because they're basically in the same business -- but apparently they're not in the same business," said Faye Landes, a senior research analyst at the Cowen Group, a financial services company. Sam's Club, said Landes, doesn't "seem to have it quite right."
Here are a few reasons why:
Sam's Club may be targeting a suffering consumer. Sam's Club CEO Rosalind Brewer noted in an earnings call that the chain suffered this past quarter from a decline in public assistance for poor customers. With the economic recovery tepid and the government safety net getting smaller, poor consumers are cutting back on their spending, even at the cheapest-of-the-cheap outlets like dollar stores and Walmart.
And Sam's Club is not a cheapest-of-the-cheap outlet. You need a membership to shop there, a privilege that comes with a $45 yearly membership fee. That's cheaper than Costco's $55 a year, but it's still an expense.
Sam’s Club, the Walmart-owned purveyor of bulk toilet paper and ketchup, had a terrible last few months, the company announced Thursday. Meanwhile its competitor Costco is doing just fine.
Sales at Sam's Club stores open for a year or more fell 0.5 percent from a year ago in the just-ended fiscal first quarter, the company announced Thursday. The poor results come a few months after the chain laid off 2,300 workers.
Costco, in comparison, recently took home $457 million in profits, even as its quarterly results disappointed Wall Street expectations.
"The divergence from Costco is striking, because they're basically in the same business -- but apparently they're not in the same business," said Faye Landes, a senior research analyst at the Cowen Group, a financial services company. Sam's Club, said Landes, doesn't "seem to have it quite right."
Here are a few reasons why:
Sam's Club may be targeting a suffering consumer. Sam's Club CEO Rosalind Brewer noted in an earnings call that the chain suffered this past quarter from a decline in public assistance for poor customers. With the economic recovery tepid and the government safety net getting smaller, poor consumers are cutting back on their spending, even at the cheapest-of-the-cheap outlets like dollar stores and Walmart.
And Sam's Club is not a cheapest-of-the-cheap outlet. You need a membership to shop there, a privilege that comes with a $45 yearly membership fee. That's cheaper than Costco's $55 a year, but it's still an expense.
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