Costco profit up 7 percent as shoppers seek deals
NEW YORK (Reuters) - Costco Wholesale Corp (COST.O) reported a nearly 7 percent rise in fourth-quarter profit on Wednesday as price-conscious shoppers headed to the retailer's warehouse club locations for bargains on food and gasoline.
Costco also said it was "comfortable" with analysts' average estimate for its current fiscal first quarter, but it said full-year earnings could come in anywhere between $3 per share and $3.25 per share.
"We, like you, read the news every day, and we are approaching fiscal '09 very conservatively," said Chief Financial Officer Richard Galanti on a conference call.
Costco's results came the same day that many major U.S. retail chains, like Target Corp (TGT.N) and J.C. Penney Co Inc (JCP.N), posted disappointing September sales and warned of lower-than-expected quarterly profits. U.S. consumers, spooked by an expanding financial crisis, have shifted their habits and avoided spending on all but necessities.
But sales at Costco and rivals BJ's Wholesale Club Inc (BJ.N) and the Sam's Club unit of Wal-Mart Stores Inc's (WMT.N) largely outpaced those of other retailers, as the clubs lured shoppers with discounts on bulk items like fruit and cereal.
"The trend is to stay at home, eat at home and conserve money wherever possible," said Ben Pivar, vice president at consulting firm Capgemini.
Costco's net income rose to $397.8 million, or 90 cents per share, for the fiscal fourth quarter ended August 31, up from $372.4 million, or 83 cents per share, a year earlier.
The latest quarter's results included charges of 7 cents per share. Excluding a litigation charge, Costco earned 92 cents per share, which compares with analysts' average estimate of 93 cents a share, according to Reuters Estimates.
Quarterly net sales rose 13 percent to $22.6 billion, excluding membership fees, which rose to $473.7 million from $388.2 million, the Issaquah, Washington-based company said.
Costco said sales in September at clubs open at least a year rose 7 percent. Analysts, on average, were expecting same-store sales to rise 7.5 percent.
In afternoon trading, shares rose 56 cents to $58.36.
MARGIN PRESSURES
Warehouse club operators have emerged as a relatively bright spot in the struggling U.S. retail sector.
Customers pay an annual fee to shop at Costco, which sells everything from TVs and toys to bulk-sized packages of paper towels. Costco also operates gasoline stations, typically offering prices cheaper than those of local competitors.
But it warned in July that quarterly profit would miss Wall Street's estimate at the time of $1 per share, as soaring energy prices and inflationary pressures drove up the cost of doing business. Continued...
