Costco Down 6% Despite Hitting Forecasts

Dec.13.07 | About: Costco Wholesale (COST)

Warehouse retail giant Costco (NASDAQ:COST) posted Thursday FQ1 2008 net income and revenue that matched analyst estimates. Profits rose 11% despite a slowing U.S. economy. Net income rose to $262 million ($0.59/share) from $236.9 million ($0.51/share) a year earlier. Revenue increased 12% to $15.81 billion from $14.15 billion. Analysts polled by Thomson predicted EPS of $0.59 on revenue of $15.81 billion. Same-store sales were up 8% over the quarter. Costco said domestic sales grew 5% during Q1, while international sales jumped 17%. Much of that growth, however, may have been due to a weak dollar. Costco sells both bargain items and high-end merchandise, in contrast to competitors Sam's Club (NYSE:WMT) and BJ's (NYSE:BJ). Costco has lead the pack during the 2007 holiday season. "Clearly this is one of the few momentum stories in retail," Jefferies analyst Daniel Binder wrote in a recent note. "But we remain concerned that consumer weakness could hit the more affluent Costco customer in 2008." Costco Earnings Call Transcript (later today).

Despite matching estimates, shares were off 6.2% in pre-market trading. "Provided the stock's material outperformance year-to-date, Costco's first-quarter earnings per share of 59 cents probably won't be enough today, particularly at the open" JP Morgan analyst Charles Grom said. "Net, Costco reported a good, not great, quarter."

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