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Costco (COST) Not Living Up to Its Promise

On the surface investors may think that Costco (COST) is a place to be in an economic downturn. In analyzing companies that are doing well during the recession, you'd think businesses offering the cheapest prices would be the leaders. And in some cases, as with Wal-Mart (WMT) and Family Dollar (FDO), they are. These companies are thriving because customers can get more for less.

But the same hasn't been true for COST. Its performance has been horrible during a time when conditions are ripe for its success. I blame management for the stumble, and I would stay away from this stock. It is likely that COST will miss current earnings estimates of $.54 in the current period when that number is released in late May.

I wouldn't wait for the news. I rate COST a D or sell.