Costco Earnings Exceed Views As Retailers Overall Retrench

Investor's Business Daily

Costco Wholesale (COST) continued to stand out vs. other discounters and retailers overall, reporting fiscal first-quarter earnings Wednesday that beat analyst estimates.

The warehouse club giant Costco earned 95 cents a share, up 19% vs. an adjusted 80 cents a year earlier. That snapped a four-quarter string of accelerating EPS growth. But analysts had expected 93 cents.

Net revenue rose 10% to $23.2 billion, as Costco previously reported. Same-store sales grew 7% overall and in the U.S., with a 9% international gain.

Membership fees rose 14% to $511 million. That more than ac counts for the $416 million in net income. But it was a little less than some analysts expected.

Costco operates 621 warehouses. Its shares fell 59 cents to 97.72, their second straight fractional loss after hitting a record high intraday Tuesday.

Stock Paying DividendBut the stock has rallied strongly since late November, when Costco announced it would pay a $7-a-share special dividend to beat the possible near-tripling of dividend tax rates as part of the year-end fiscal cliff.

A slew of companies have announced special or accelerated payouts, including Las Vegas Sands (LVS), Oracle (ORCL), Wal-Mart Stores (WMT) and Walt Disney (DIS).

Wal-Mart's accelerated dividend hasn't done much to help its shares. CEO Mike Duke said late Tuesday that a weak economy and fiscal cliff concerns are hurting Wal-Mart's moderate-income clientele, affecting sales.

Wal-Mart shares fell nearly 3%, nearing their 200-day moving average after finding support there last month. The stock peaked in mid-October.

Specialty discounters also have struggled. Dollar General (DG) reported better-than-expected third-quarter profit on Tuesday, but its implied Q4 guidance was below Wall Street forecasts. The retailer cited cautious consumers and increased competition.

Dollar General shares tumbled 8% on Tuesday to a nine-month low. Dollar Tree (DLTR) lost 4%. Family Dollar (FDO), which had been doing better than its rivals, slumped 8%, plunging through its 200-day line.

All three stocks rallied Wednesday, but recouped only a fraction of Tuesday's big losses.

Retail's struggles reached beyond discounters. Sporting goods stores were big losers Wednesday, with Dick's (DKS), Hibbett Sports (HIBB) and Cabela's (CAB) all losing about 3%.

Several apparel makers and retailers also suffered significant stock losses, including Foot Locker (FL), down nearly 4%.

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