* Q1 adjusted EPS $0.65 vs analysts' view $0.62
* Warns Q2 Wall St EPS view $0.75 on high side
* Says hard to predict full year EPS
* Shares down 1.5 percent (Recasts, adds stock price, company comments)
NEW YORK, Dec 11 (Reuters) - Costco Wholesale Corp's (COST.O) quarterly profit rose slightly as strong results from its gasoline stations helped to offset weak consumer demand for all but the most essential household items.
The warehouse club operator on Thursday also said Wall Street estimates for earnings in its current second fiscal quarter, which includes the winter holiday shopping season, are on the high side of expected results and it intends to be "aggressive" cutting pricing to win sales.
"We haven't seen sales improve. The trend in the quarter was lower, not higher," said Chief Financial Officer Richard Galanti on a call with analysts, of recent results.
Shares were down 30 cents or 0.6 percent at $53.39 in afternoon Nasdaq trading.
Warehouse clubs like Costco had been seen as a relative safe heaven amid a beaten-down U.S. retail sector as shoppers seek out their discounted prices on food and toiletries. But Costco's results showed that its business is not immune from a year-long U.S. recession that has crimped spending among even higher-income shoppers.
Analysts also said the boost Costco received from its gasoline business in its latest quarter was expected to be temporary.
"It's unlikely that they will see this sort of positive performance in future quarters," said Neil Currie, a retail analyst with UBS.
Net income rose to $262.5 million, or 60 cents per share, for the fiscal first quarter ended Nov. 23, from $262 million, or 59 cents per share, a year earlier.
Excluding a charge for accounting adjustments on insurance contracts and an impairment of corporate investments, earnings were 65 cents per share, compared with analysts' view of 62 cents, according to Reuters Estimates.
Quarterly sales rose almost 4 percent to $16.04 billion, excluding membership fees, which increased 6 percent to $358.7 million. Sales at its clubs open at least a year, a key retail gauge known as same-store sales, increased 1 percent.
It said demand for groceries was strong, but demand waned for most other merchandise.
"Clearly, food is driving our business," Galanti said.
CUTTING WALL STREET EXPECTATIONS FOR THE CURRENT QUARTER
Costco is the largest U.S. warehouse club operator, competing with Wal-Mart Stores Inc's (WMT.N) Sam's Club and BJ's Wholesale Club Inc BJ.N.
It has won customers by offering unexpected items, like Burberry handbags, alongside typical warehouse club goods, such as bulk-sized packages of napkins and crates of fresh fruit. As a U.S. recession has squeezed budgets, customers have come to its clubs for low prices on food.
But its business has slowed in recent months as shoppers have avoided splurging on unnecessary items, like jewelry.
For the second quarter, Galanti said Wall Street expects earnings of 75 cents per share, but that will likely be on the high side.
Given the volatile environment, Galanti said providing an updated full-year earnings view was hard. In October, he forecast earnings per share of $3 to $3.25, while analysts were looking for $3.25. The average forecast now stands at $3.01 per share, according to Reuters Estimates.
STRONGER DOLLAR TO WEIGH ON RESULTS.
Galanti also said that if currency rates stayed where they are now compared with a year ago, that alone would hurt full-year earnings by 10 to 15 cents per share.
Costco, with 550 warehouses worldwide, operates stores in international markets like Canada, the United Kingdom, Japan and Mexico. It said its first quarter earnings were hurt by roughly 3 cents per share as the stronger the U.S. dollar reduced the value of foreign revenues converted into greenbacks.
Meanwhile, it got a lift from falling gasoline prices, which boosted profitability at the gas stations it operates at its clubs. In its latest quarter the average price for gasoline fell from roughly $3.68 a gallon to about $1.89, according to the Energy Information Administration.
Costco replenishes its gas supplies on a daily basis, compared with traditional stations that turn inventory weekly. When prices fall, Costco can sell gas purchased at the current cheaper price, helping margins, while competitors are selling supplies bought when prices were higher.
For this current fiscal year, Galanti said the retailer expects to open roughly 22 new warehouse clubs.
He expects capital expenditures in the range of $1.5 billion to $1.6 billion, down from an earlier estimate of $1.6 billion to $1.8 billion. (Reporting by Nicole Maestri; Editing by Gerald E. McCormick, Dave Zimmerman)