Costco (COST  ) shares were down by slightly more than 1% following the company's fiscal Q2 results which showed a marginal beat on the top and bottom-line. However, shares were lower due to the company noting continued impacts due to supply chain issues which are leading to inventories not being fully stocked, delays for items, and higher freight charges. Another factor was a drop-off in same-store sales growth especially in February compared to January.

Typically, this wouldn't be meaningful enough to move the stock price, but investors are on guard for any signs of slowing consumer spending given fears that the economy is decelerating, higher costs due to inflation, increased spending on services vs goods, and tough YoY comps due to the stimulus payments.

Still, Costco is better suited than most of its competitors to thrive in an inflationary environment. Consumers are more likely to buy in bulk. So far, Costco hasn't meaningfully raised prices as it focuses on increasing market share.

Inside the Numbers

In its fiscal Q2, Costco reported $2.92 per share which topped consensus expectations of $2.76 a share which is a 36% increase. Revenue came in at $51.9 billion, beating expectations of $51.5 billion which was a 15% increase from last year.

Q2 same-store sales came in at 14.4% which was better than expectations of a 12% increase. However, this is a deceleration from its 14.9% increase last year.

Another potential reason that investors may have been disappointed by Costco's results is that there were hopes that it would increase its membership fee. Most of Costco's earnings come from its membership fees, and it's typically been hiked every 5 years, and there may be more of an impetus to increase it given recent inflation.

Given that there are 62.5 million Costco members, a $10 increase would lead to an additional $625 million in earnings. Amazon (AMZN  ) recently announced its own price increase for its Prime service which is a Costco competitor in many ways.

Costco has a 91.6% retention rate, so it's unlikely customers would balk especially in an inflationary environment when buying in bulk means more value. At many retailers, we are seeing margins increase which shows some portion of price increases are going to the bottom line. Costco's margins have stayed the same, indicating that they are not adding anything extra to prices beyond inflation.