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Q1 earnings calls featured a decent dose of negative commentary on consumers and the economy and one novel bit came from Costco's Richard Galanti, who was asked about consumers trading down:
Historically, like within fresh protein, we've always seen when there's a recession, whether it was '99 or '00 or '08, '09, '10, we would see some sales penetration shift from beef to poultry and pork. We have seen some of that now. I think anecdotally, I heard a few months ago from our Head of Food and Sundries buyer, that we saw some switch even to some canned products, like canned chicken and canned tuna and things like that. But on the KS side, we've also seen that. I think last quarter, I mentioned that on a year-over-year basis, there's a 150 basis point increase in private label sales penetration. And this year, at the end of the quarter, it's 120 basis points. So still, over a full percentage point delta in sales penetration.
If you go back over the last 10 years, my guess is that on a year-over-year basis, maybe we've gone from, I'm guessing, 22% or 23% to 25% or 26%. So call it, 300 basis points over 10 years or 8 years. So 30 to 50 basis points versus 120 and 150 in the last couple of quarters. So yes, that would, again, at least anecdotally, suggest that we've seen people looking for better bargains. We try to correct people when they said was it a downgrading because, arguably, it was an upgrade when they went to Kirkland Signature.
There are definite signs of a US slowdown and it won't be long before it shows up in the data. The Fed will likley hike in June or July but the next big question will be when they cut, because once the tide turns on the economy, it can deteriorate quickly.
