Why Costco Wholesale stock lagged the market today

Costco Wholesale (COST 0.10%) the stock didn’t have one of its best trading sessions on Monday. Like his peers in the retail industry, he is eyeing potentially damaging labor action, particularly a looming strike by dockworkers in East and Gulf Coast ports. Cautious investors avoided the stock, which fell marginally in price while S&P 500 the index rose to close 0.4% higher.

Hours away from a strike

As of late Monday afternoon, the International Breakers Association had not reached an agreement with its counterpart, the United States Maritime Alliance (a group of container carriers, port associations and employers).

At the time, it looked increasingly likely that some 45,000 dockers union members employed at 36 ports would strike just after midnight on Tuesday.

This would have an immediate impact on the nation’s supply chain, on which a wide variety of businesses depend. The retail sector is directly in the line of fire as they need to keep their shelves stocked and storage areas full of inventory. This goes double for large-scale general retailers that sell products in many different categories — for example, Costco.

Preparations done

The company’s management recently signaled confidence in its ability to withstand the privations of a strike. On its fiscal fourth-quarter earnings call late last week, CEO Ron Vachris said Costco has taken a number of steps to prepare for this worst-case scenario. These include pre-shipment merchandise that could be popular during the all-important holiday season.

While this is somewhat reassuring, if such a widespread strike lasts for any significant length of time, all retailers will certainly have to deal with some degree of disruption to their business. Not only Costco shareholders, but investors in many businesses — not to mention this nation’s consumers — will be watching and hoping for a quick end to the labor dispute.