* 2nd-quarter profit falls 15 pct to $463 mln
* Sales rise 6 pct to $25.76 bln, misses est $26.65 bln
* February same-store sales up 2 pct vs est 2.3 pct
* Member renewal rates continue at record levels - CFO
* Shares fall 3 pct
March 6 Warehouse retailer Costco Wholesale Corp
reported a bigger-than-expected 15 percent fall in
quarterly profit as unusually deep discounting in the holiday
shopping season hurt margins, sending its shares down as much as
Bad weather and six fewer shopping days between Thanksgiving
and Christmas prompted many U.S. retailers to offer deeper
discounts and increase promotions to lure shoppers.
Weaker gross margins, particularly during the holiday
shopping season, and lower international profit due to a
weakening of foreign exchange rates hurt earnings in the second
quarter, Chief Financial Officer Richard Galanti said on a
conference call with analysts.
Wal-Mart Stores Inc, the world's largest retailer,
last month blamed sharp cuts in food stamp benefits and higher
payroll taxes for a disappointing full-year profit forecast.
At Sam's Club, Wal-Mart's warehouse chain that competes with
Costco, sales at stores open at least a year - a key retail
metric called same-store sales - fell 0.1 percent in the quarter
ended Jan. 31.
In contrast, Costco's sales at stores open at least a year
rose 3 percent in the second quarter ended Feb. 16.
The company's comparable sales rose 2 percent in February,
missing the average analyst estimate of an increase of 2.3
Costco said February sales were hurt by club closures
prevalent across the United States, Canada and even in Japan due
to frequent snow storms.
Even so, Nomura analyst Robert Drbul said Costco's
consistent low-mid single digit traffic gains over the last year
in spite of the challenging retail environment was "particularly
"We continue to believe the fundamentals of the company
are intact," Drbul said.
The warehouse club operator, which offers discounted
merchandise to members, said membership renewals had improved in
"Our renewal rates continue at record levels and we continue
to see increasing penetration of the executive membership," CFO
Executive members are the company's highest spending
customers and represent about 38 percent of total cardholders.
They pay an annual fee of $110 and are eligible for a 2 percent
New membership sign-ups rose 13 percent in the quarter,
mainly driven by new stores in Japan and Australia.
"High renewal rates, strong new sign-ups and accelerating
square footage growth for the next few years, all point to the
secular strength of this story," Janney Capital analyst David
Costco's sales rose 6 percent to $25.76 billion in the
quarter, missing the average analyst estimate of $26.65 billion,
according to Thomson Reuters I/B/E/S.
Excluding fuel and forex, same-store sales rose 5 percent in
the 12 week-period.
The company's net profit fell to $463 million, or $1.05 per
share, in the quarter from $547 million, or $1.24 per share, a
Costco has seen steady growth in sales since 2009 due to a
continuing increase in its membership base, which saw 4.3
million new members signing up in 2013, according to research
The Issaquah, Washington-based company's shares were down
2.4 percent at $113.65 in late evening trading on the Nasdaq.
They fell to a low of $112.27 earlier in the session.
Costco's shares trade at roughly 23 times the company's
expected earnings, well above the multiples for Wal-Mart Stores
Inc and Target Corp, according to Thomson