Today's performance of Costco Wholesale's stock fell behind the market's pace.
Costco Wholesale ((COST) -0.48%) didn't have a great trading day on Monday. Like other retail companies, it's facing the possibility of harmful labor actions, specifically a possible strike by dockworkers at ports on the East and Gulf Coasts. Cautious investors stayed away from the stock, which dropped slightly in price while the S&P 500 index climbed to close 0.4% higher.
On the brink of a walkout
By the late afternoon on Monday, the International Longshoremen's Association hadn't reached an agreement with its opposite number, the United States Maritime Alliance (which represents container carriers, port associations, and employers).
At that point, it seemed increasingly likely that about 45,000 dockworkers in 36 ports would go on strike shortly after midnight on Tuesday.
This strike would have an immediate effect on the country's supply chain, which numerous businesses rely on. The retail market is particularly vulnerable, as it needs to keep its shelves stocked and storage areas full of inventory during this period. This is especially true for large-scale retailers that sell a wide variety of products, such as Costco.
Making preparations
Recently, company management has expressed confidence in its ability to endure the consequences of a strike. During its fiscal fourth-quarter earnings call at the end of last week, CEO Ron Vachris mentioned that Costco has been implementing several measures to prepare for this worst-case scenario. These include shipping products that are likely to be popular during the crucial holiday season in advance.
While this is somewhat comforting, if the strike lasts for a significant period of time, all retailers will likely have to deal with some disruption to their operations. Therefore, not only Costco shareholders, but investors in numerous other businesses, as well as this nation's consumers, will be keeping a close eye on the developments of the labor dispute and hoping for a swift resolution.
In light of the potential strike, Costco's finance team might need to adjust their budgeting strategies due to potential supply chain disruptions. If the strike drags on, investors may consider diversifying their portfolios, including exploring different investment opportunities in the finance sector.
