Costco is recession proof: strategist

Costco (COST) opened the doors to its first brick-and-mortar store in Shanghai on August 27. Consumers flooded into the store before its 9 a.m. opening. The crowd got so big the company had to shut its doors early. CFO Richard Galanti said over 130,000 people signed up for memberships on just that day alone.

“It was like Thanksgiving Thursday at Walmart,” Bruderman Asset Management Chief Market Strategist Oliver Pursche told Yahoo Finance’s On the Move. “Being able to buy at a steep discount is a relatively new business model that the Chinese are seeing. They're not used to seeing the mega stores that offer discounted prices — I think that’s why people flock to it.”

Discount stores are appealing to consumers in China as they continue to feel pressure from the trade war with the United States, according to Pursche.

In August, industrial output and retail sales data pointed to slowing demand and low confidence among businesses and consumers in China. Value-added industrial output rose 4.4% in August from a year earlier, far below economists’ expectations of 5.2% growth. Retail sales rose 7.5% in August from a year earlier, which was below expectations for a 7.9% rise.

But Pursche said a company like Costco does not have to worry about an economic slowdown in China or any country, for that matter.

“Costco is one of those recession-proof companies because people will flock to it in good times and buy in bulk... they'll also flock to it when things are less secure,” he said.

Valentina Caval is a producer at Yahoo Finance.

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