The Rundown - Costco Earnings Breakdown, Key Inflation Metric Meets Expectations

Episode Date: May 31, 2024

Stock market update for May 31, 2024.

Public.com presents the rundown, your daily market update in five minutes. My name is Zadmani, and today is Friday, May 31st. In today's episode, we update you on a glitch that occurred in the stock market yesterday and the latest inflation info that dropped this morning. Also, we recap Costco's earnings and why Costco customers are happy, but investors aren't. Then stick around to the end of the show to find out how much money Walmart store managers will start making now. It is a lot. All right, let's go.

Oh. Well, guys, Thursday was another down day for the stock market. All three major indices were in the red, with the NASDAG doing the worse down more than 1%. Tech stocks got crushed yesterday, especially Salesforce, which dropped 20%, and even Microsoft and Nvidia dropped more than 3% as well. And something kind of weird happened yesterday. The values of the Dow Jones and S&P 500 index froze around 10.40 a.m. Eastern time, like the values of the exchanges weren't being updated. And it turns, out that it was like a glitch in the data feed system and prices started updating again after about an hour. Doesn't seem like anything shady was going on, but there was definitely some conspiracy theories being thrown out on Twitter. But I mean, it's Twitter. So, of course. Honestly, though,

with the way the markets ended up doing yesterday, I kind of wish they were just frozen at 10 a.m. It would have saved me some money. Now, it looks like the NASDAQ and S&P 500's five-week winning streak might be in jeopardy this week after back-to-back down days. We're going to need a big rally today to save the week. And we just got some breaking news this morning, the latest inflation report, the PCE, which is the Fed's preferred inflation measurement, just came out this morning, and it showed that inflation in April was up 2.7% year over year, and core PCE was up 2.8% year over year. Both of those numbers came in line with expectation.

So that's pretty encouraging. Now, we're not quite at the 2% target the Fed wants, but at least we're not seeing an acceleration of inflation again like we saw the last couple months. So it looks like inflation is starting to head back in the right direction after a couple bumpy months. Maybe this report's going to get investors excited again, and we might actually end up getting that rally that saves the week. Let's run through some headlines, starting with Costco. They reported their earnings after the bell yesterday, and it was kind of a mixed bag.

The company actually missed its revenue estimates for the quarter, but did beat on earnings for the quarter. There was a lot of positive takeaways from their earnings report. Their foot traffic was up 10% year over year, which is better than their competitors. Costco even saw their e-commerce jump 20% year over year because low-key Costco's website has been getting better. And Costco makes 70% of its operating profits from its membership fees, and those continued to grow. But the stock was actually down after these earnings came out because I think some investors were hoping that Costco would announce an increase to membership prices, which has stayed the same since 2017. A basic Costco membership is currently $60 a year, and the executive membership is double that.

Now, Costco's management has previously said that it was just a matter of time in regards to raising membership prices, but they haven't done it yet. Costco just continues to be the hero that we deserve. and there's a reason why they have a cult following. Oh, and Costco executives confirmed again on their earnings call that the $1.50 hot dog combo is not going anywhere. Great for consumers, but I guess not for investors. So Costco stock was down more than 1% in reaction to these earnings.

But don't feel so bad for Costco investors because the stock is up more than 25% since the start of the year. Outperforming the S&P 500. Let's shift gears and talk about Bill Ackman. Billioner hedge fund manager Bill Ackman is preparing to IPO his investment firm Pershing Square. Now, Bill Ackman has gotten a lot of attention and celebrity over the last couple years, especially because he's been really active on Twitter these days. And now he's ready to IPO his investment firm that he founded back in 2004. Now, before the IPO, Ackman plans to run a private

investment round that would value the firm at north of $10 billion. And the private investment round is expected to raise about $1 billion for Pershing Square. Bill Ackman is trying to do is move the firm's perception towards an asset manager instead of a hedge fund and plans to IPO the firm in either 2025 or 2026. Let's talk about some stocks making moves today. Starting with Gap. The shares of the clothing retailer are up big after they reported better than expected first quarter earnings. Gap reported revenues of $3.4 billion. That's up 5% from last year, beating Wall Street estimates. And their profits saw a huge jump. Profits were $158 million. which is really nice to see since the company lost $18 million in the first quarter of last year.

Anytime you go from losing $18 million to making $158 million, investors are going to love that. Gap is seeing growth across the board. All their brands like Banana Republic, Athletica, Old Navy, and the flagship Gap brand saw their sales increase in the first quarter. Even I found myself buying some dad jeans from Old Navy a few weeks ago. And they're great. Company is feeling pretty confident right now in their business, and they raised their guidance for fiscal 2024 after their solid first quarter earnings. investors love when companies raise guidance, and the stock is up 20% in the pre-market in reaction

to these earnings. You know, I think we're starting to see a full comeback of the mid-2000 retailers, right? Abercrombie is crushing it. Gap is reporting solid earnings. American Eagle actually reported record revenues, and Foot Locker is also showing some encouraging signs in their business. So pretty much every company that I bought from when I was in high school is making a comeback. I wonder if vans are going to make a comeback next.

Are they still around? A stock not doing so great this morning is truth. Social. Shares of the social media company are down this morning after former President Donald Trump was found guilty in New York yesterday on 34 counts in a hush money trial. True Social was Donald Trump's preferred social media platform and he is the larger shareholder in the company. So investors are feeling a bit nervous right now. Stock is down more than 6% in the pre-market, but it's still valued at over $8 billion, even though the company made less than $1 million in revenue in Q1. I got a feeling this stock's going to be pretty volatile over the next

few days, weeks, months. All right, let's wrap the show with a fun fact. Today's fun fact is about Walmart, because Walmart store managers can now make $500,000 a year. Walmart recently updated their compensation package for store managers offering better pay, stock incentives, and a bonus depending on the store's performance. See, Walmart had a ton of managers quit over the last couple years because, I mean, it's a pretty tough job if you think about it.

They're managing hundreds of employees, millions in inventory, thousands of customers on a daily basis and the occasional Karen. So I can see why the turnover rate would be pretty high for that role. So Walmart is opening by dangling a massive bag that they can keep more managers around. I mean, $500,000 is a lot of money. Probably well deserved, honestly. All right, guys, that's the rundown for today. That's the rundown for this week. Hope you guys enjoyed today's show. It was a short week, and I feel like it flew by. Next week is the start of June. We're entering summer season, and typically things tend to slow down a bit, but there's always action happening on Wall Street, so we'll keep you guys in the loop. We got a Fed meeting coming.

up in a couple weeks and we're less than five weeks away from Q2 earning season, which starts in July. So there's that. If you guys enjoyed today's episode, please give us a five-star rating on Apple and Spotify. The engagement really does help the show. And don't forget to vote in today's Spotify poll as well. In yesterday's poll, we asked if you guys were Amazon Prime subscribers, and I was shocked when 32% of people who voted said they were not. I legitimately thought that the answer was going to be like maybe 10% no. So the results for those polls are always very interesting. All right, thank you guys so much for listening. Have a great weekend.

Shout out to Connor and Mike for all the hard work behind the scenes. And we'll see you guys back here on Monday. This is the rundown, your real-time resource for news events and trends in the markets. All views presented in this show reflect the opinions of the guests. You should not take any mention of a publicly traded security as recommendation to buy, sell or hold that security. Run-down guests are not financial advisors and are not affiliated with public holdings or its subsidiaries. You should make your own financial and investment decisions or consult. Respective professionals.

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