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Retail giant Costco warned that energy costs and pricing strategy will take its profit 'well below' expectations. Is that a sign of what's to come from the retail sector?
Costco Wholesale Corp [COST
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] warned on Wednesday that its quarterly profit would miss current Wall Street targets because of soaring energy costs and other inflationary pressures, sending shares of the No. 1 U.S. warehouse club operator tumbling by the close.
The warning sparked fears that competitors like Wal-Mart [WMT
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] and BJ's Wholesale Club [BJ
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], which have been standouts in a struggling U.S. retail sector, could be facing similar woes. Shares of those companies also fell.
But for every seller there’s a buyer. “I’m looking to get long,” says Fast Money's Jon Najarian on CNBC’s Closing Bell. Not tomorrow because there will probably be more selling, but soon.”
Najarian feels that current troubles at Costco are a result of the recent run in oil. And as a result, if the price of crude hits a plateau, Costco's fortunes should take a turn for the better.
“We have another surrogate for trading crude,” he says. In retail, “I’m looking at Costco around $61 and I also like Target [TGT
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] as a back to school play.”
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