Bloomberg News

Costco Profit Lags Analysts’ Estimates on Higher Expenses (3)

October 09, 2013

Costco Wholesale Corp. Store

A customer pushes a cart of purchased items outside a Costco Wholesale Corp. store in Hackensack, New Jersey. Photographer: Ron Antonelli/Bloomberg

Costco Wholesale Corp. (COST:US), the largest U.S. warehouse-club chain, posted fourth-quarter profit that trailed analysts’ estimates, hurt by higher costs and lower gasoline prices that crimped sales.

Net income in the quarter ended Sept. 1 rose to $617 million, or $1.40 a share, from $609 million, or $1.39, a year earlier, the Issaquah, Washington-based company said today in a statement. Analysts projected profit of $1.46, the average of 13 estimates compiled by Bloomberg.

Costco joins retailers from Wal-Mart Stores Inc. (WMT:US) to Macy’s Inc. (M:US) in reporting sales that trailed analysts’ projections for their most recent quarters as U.S. consumers restrain spending. The profit miss (COST:US), Costco’s first in eight quarters, came as selling, general and administrative expenses rose faster than some analysts expected and revenue climbed at the slowest pace since 2009.

Higher expenses “could be attributable to continued IT spending and/or healthcare related expenses,” David Strasser, an analyst with Janney Montgomery Scott LLC in New York, wrote today in a note. He recommends buying Costco shares. “Both negative gas prices and negative FX hurt” September comparable-store sales.

Revenue rose 0.8 percent to $32.5 billion, trailing analysts’ $32.7 billion average estimate. The gain was the smallest increase since sales (COST:US) fell in the quarter ended August 2009. Selling, general and administrative expenses rose 1.8 percent to $3.1 billion, more than the 0.3 percent increase projected by Strasser.

Shares Fall

Costco advanced 2.1 percent to $114.59 at the close in New York. The shares have climbed 16 percent this year, matching the Standard & Poor’s 500 Index.

Sales at stores (COST:US) open for more than a year increased 5 percent in the period, excluding changes in gasoline prices and foreign-currency exchange rates. That compared with an increase of 7 percent on that basis in the third quarter.

Separately, Family Dollar Stores Inc. (FDO:US), the second-largest U.S. dollar-store chain, said revenue rose 5.8 percent to $2.5 billion in the quarter ended Aug. 31, trailing analysts’ $2.56 billion average estimate.

“The environment was more challenging than expected,” Chief Executive Officer Howard Levine said in a statement, without elaborating.

Family Dollar, based in Matthews, North Carolina, said it would earn $3.80 a share to $4.15 a share in the year ending Aug. 30. Analysts’ estimate $4.12.

The shares slipped 1.1 percent to $68.71.

To contact the reporter on this story: Chris Burritt in Greensboro at cburritt@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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Companies Mentioned

  • COST
    (Costco Wholesale Corp)
    • $126.43 USD
    • 0.72
    • 0.57%
  • WMT
    (Wal-Mart Stores Inc)
    • $76.32 USD
    • 0.51
    • 0.67%
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