Why Costco shares have been dropping

The decline in Costco Wholesale (COST) shares can be attributed to a combination of factors:

1. **Disappointing Sales Data**: Costco's shares fell nearly 4% in December 2024 after the company reported disappointing comparable sales for November. This was followed by a middling fiscal first-quarter earnings report, which missed estimates.
2. **Macro Headwinds**: Costco's worst day of the month came on December 1, 2024, when the stock fell 6.6% after it reported November comparable sales with comps adjusted for fuel and currency exchange up just 5.3% globally and 4.6% in the U.S. This marked a noticeable deceleration from earlier in the year, showing that Costco may be feeling the same macro headwinds that much of the rest of the retail sector is.
3. **Higher Costs and Reduced Profitability**: Costco's gross margin fell by about 60 basis points, indicating challenges in passing higher costs to consumers in an inflationary environment. The company's gross margin fell to 17.86% in 2024, down from 18.26% in 2023. Additionally, Costco fell another 4% in the broad market sell-off on December 15 after the Federal Reserve raised interest rates again and forecast another 75 basis points of rate hikes in 2023, adding to fears that a recession is coming.
4. **Impact of COVID-19**: While Costco's performance during the pandemic was robust, the end of pandemic-related restrictions and the return of inflation have led to a normalization of its stock price.
5. **Competition and Market Dynamics**: Costco faces competition from other retailers, including Amazon, Walmart, and Target, which have their own strengths and strategies. The company's performance is also affected by broader market trends and consumer behavior.

In summary, the decline in Costco's stock price is likely a result of a combination of factors including disappointing sales data, macroeconomic headwinds, higher costs and reduced profitability, impact of COVID-19 and competition and market dynamics.