Costco Q4 Sales Fall Short

Costco Wholesale said early Wednesday FQ4 net income rose 4.7%, in line with analyst forecasts, but net sales fell short of expectations. Same-store sales were up 5% while total sales gained 3%. The largest U.S. warehouse retailer said net income for the quarter was $372.4 million ($0.83/share), vs. $355.6 million ($0.75/share) a year earlier. Net sales increased 3% to $20.09 billion from $19.5 billion. The 5% gain in same-store sales included a 4% rise in the U.S. and a 9% gain overseas. Consensus estimates were for EPS of $0.83 on $20.73 billion in sales. Net sales for F2007 were $63.09 billion, up 7% from $58.96 billion. Comparable warehouse sales increased 6% y/y.

Costco outshone many retailers during most of the summer, beating or exceeding same-store sales estimates in May, June and July. In August, though, same-store sales gained a much less-than-expected 2%. One analyst called the August numbers a "blip," but shares dropped 5.1% the day the data were released. In early 2007, Costco instituted a 90-day return policy on electronics, in contrast to its unlimited return policy for most purchases. Costco distinguishes itself by selling high-end merchandise such as pricey jewelry, plasma TVs, and top-line exercise equipment alongside warehouse-club staples like cereal and tomato sauce. It tends to attract higher-income shopper than rivals like Wal-Mart's Sam's Club and BJ's Wholesale Club. "The thing that Costco has going for them is that they tend to get a little bit more upscale customers," Coldstream Capital's Rachel Wakefield said. On Oct. 3, JP Morgan analyst Charles Grom wrote that store managers at 10 out of 14 Costco stores in California cited housing as a concern among customers, something Grom says "we are watching closely." Shares are up 19.7% YTD and 28% over the past year; the stock fell 1.15% in Frankfurt trading Wednesday morning.

Sources: Press release, Bloomberg, MarketWatch, Dow Jones
Commentary: A Preview of Q3 Earnings • Costco: Goldman, Citi Analysts Remain Cautious
Stocks/ETFs to watch: COST. Competitors: WMT, BJ, SHLD
Earnings call transcript: Costco F3Q07 • Check later for Costco's FQ4 earnings call transcript

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Comments

[JDow]

Costco still buries almost any competition it faces. Their strategy of "modest" profits allow them to buy cheap from wholesalers while at the same time helps to keep prices low and stable is brilliant, their management is to be commended www.newsvisual.com/new... . As a result, prices are much more likely to remain low when compared to other retailers.

2007 Oct 10 07:17 PM