Costco: Earnings Show Selective Weakness

Costco Wholesale (COST) reported fiscal ‘09 Q1 earnings yesterday morning, and largely confirmed the sales trends noted along with the retailer’s Nov. sales issuance last week. From Thursday's report:

• Q1 net sales up 4%, 1% on a comparable basis
• Boilerplate comps of -7% internationally, 1% company-wide; comps in local currencies of +7% internationally, 4% company-wide
• Net income essentially flat YoY at $262.5 million ($0.60/sh)

Management Notes

Gasoline profits were temporarily strong, as crude oil dropped faster than gas prices for parts of Q1. Weakness was noted in non-food discretionary items (clothing, electronics, Christmas items, etc.), especially in the past six weeks.

Parting Thoughts

I’ll have to wait for the transcripts to see what the membership numbers looked like for the quarter. This continues to be my favorite metric for evaluating the company as the recurring revenue model is what allows COST shares to maintain their premium valuation to the market.

I continue to overweight Costco shares in the Secular Trends Model for their pristine balance sheet, strong value proposition, and staid management in this most difficult of times for the global consumer.

Disclosure: Author does not hold a position in COST; shares are held in EpiphanyInvesting Secular Trends Portfolio.