Costco Warns, Joining the Retailer 'Lowered Outlook Club'

| About: Costco Wholesale (COST)

Rob Zenilman submits: In today's Wall Street Journal, James Covert reports that Costco (NASDAQ:COST) is joining the list of mid/high end retailers who are lowering their forecasts. Costco now expects to earn $0.68-$0.71/share for the current quarter (ending Sunday, September 3), and $2.23-$2.26/share for the current fiscal year. Analysts had been expecting quarterly earnings of $0.77/share, and $2.33 for the fiscal year. Costco also reported that August same store sales (stores open at least one year) rose 7% (5% for U.S. stores, and 15% for international).

Costco provided reasons for the reduced outlook, specifically mentioning weaker than expected furniture sales (fallout from a weaker housing market?), markdowns on consumer electronics, costly returns of high end televisions and lower gasoline margins.

Comment: The "Lowering Outlook" club seems to be growing every day. While Costco is regarded as a well run company, with a labor force that is both higher paid and more productive, Wall Street has always had a "few issues" with the company, primarily their liberal merchandise return (you can return pretty much anything, anytime) and their insistence on limiting margins to 12% for national brands and 14% for private label (Kirkland).

See: Costco F3Q06 Earnings Conference Call Transcript (May 31, 2006)

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