Costco: Retail is not dead

Costco (COST) may be trading just above $40, which is near a 52-week low, but its fiscal second quarter earnings show that retail is not dead -- at least at companies in the industry known for offering quality products at low prices.

For the last reported period, the warehouse retailer's net sales declined 1 percent to $16.5 billion. Same-store sames were off 3 percent, but almost all of the damage was done outside the U.S. where the sales at stores open more than year dropped 11 percent.

The fact the Costco is holding its own in the U.S. during a deep recession shows that not all retailers are created equal.

Costco said net income for the second quarter of fiscal 2009 was $239.7 million, compared with $327.9 million in the same quarter a year ago. Over $40 million in interest income helped last year's results.

As most retailers struggle, Costco's numbers are an affirmation that companies like Wal-Mart (WMT), and perhaps Target (TGT) too, may also put up reasonable results when they report their quarterly earnings. That may not seem like much compared to the overall retail market, but the three retailers are large enough that they represent a significant part of the U.S. market.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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