Costco Earnings Hit by Higher Costs

Costco Earns
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Costco Wholesale (COST) reported a first-quarter profit and sales that fell short of analyst estimates, hurt by a rise in operating expenses.

Shares of the warehouse club operator, which sells everything from carrots to coffins at its cavernous stores, fell as much as 3 percent before the bell Wednesday.

"While Costco has generally been prudent in controlling costs, Q1 selling, general and administrative [expense] was higher than we expected," Cowen and Co. analyst Faye Landes wrote in a note.

Operating expenses rose 5.5 percent to $24.3 million. Selling, general and administrative expenses rose 7.2 percent. Profit rose to $425 million, or 96 cents a share, in the first quarter ended Nov. 24 from $416 million, or 95 cents a share, a year earlier.

Analysts on average had expected the company to earn $1.02 a share, according to Thomson Reuters I/B/E/S.

Sales rose 5 percent to $24.47 billion, but missed the average analyst estimate of $25.35 billion. The company announced quarterly sales last week. %VIRTUAL-article-sponsoredlinks%Sales at stores open at least a year rose 3 percent, including the impact of lower gasoline prices and a stronger dollar. Analysts on average were expecting same-store sales to rise 3.54 percent.

Excluding fuel and forex, same-store sales rose 5 percent.

Rival Walmart Stores (WMT) reported a third-straight quarterly decline in U.S. same-store sales last month and forecast a lower-than-expected profit for the holiday quarter.

Costco, whose members pay up to $110 a year to shop at its big stores and website, operates 648 warehouses, including 461 in the United States and Puerto Rico. It also has stores in Canada, Mexico, the United Kingdom, Australia, Japan and other Asian countries.

Shares of the Issaquah, Wash.-based company were down 1.4 percent at $118.25 before the bell.

Which Warehouse Club Is Best?
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Costco Earnings Hit by Higher Costs
While the economy is in rough times, Costco Wholesale, BJ's Wholesale Club and Sam's Club are in a sweet spot. So Smart Money set out for an unscientific survey of the Big Three. Its goal was to find the cost of a basket of 10 comparable grocery items purchased at each of the three stores, while checking out the selection and service along the way.

' Read the Article

First Up: BJ's
Number of stores: 178
Location: 16 Eastern states
Membership fee: $45

Pros: Wide selection of items, very friendly staff, modest prices.

Next: More on BJ's
Cons: Loud TVs with infomercials line the aisles, no wine section.

In Summary: BJ's offers an overall pleasant shopping experience and affordable prices. Total shopping cost: $55.35.

Next: Sam's Club
Number of stores: 593
Location: Nationwide
Membership fee: $40

Pros: Wide shopping aisles, exotic seafood choices, quality products.

Next: More on Sam's Club
Cons: Lots of imposing security cameras, no express checkout lane, less selection than BJ's.

In Summary: Sam's Club has a smaller selection than BJ's, but has quality products. Checkout prices are nearly the same as BJ's. Total shopping cost: $55.66.

Next: Costco
Number of stores: 393
Location: Nationwide
Membership fee: $50

Pros: Freshest baked goods, high-end wine choices, slightly more brands than Sam's Club.

Next: More on Costco
Cons: Most expensive membership fee, fewer brands available than BJ's, messy food court area, uncleaned milk spills in the dairy aisle, most expensive checkout cost.

In Summary: Costco has a better selection of higher-end items, but you'll pay more for everyday shopping. Total shopping cost: $62.31.

Next: SmartMoney's verdict
For our money, the best of the bunch was the one with the lowest prices, widest selection and friendliest service: BJ's.

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