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Costco Tops Estimates in Sign That It’s Weathering Price War

Published on Oct 2 2016 12:22 PM in Retail tagged: Featured Post / USA / Costco / wholesale

Costco Tops Estimates in Sign That It’s Weathering Price War

Costco Wholesale Corp. reported fourth-quarter earnings that beat analysts’ estimates, even as falling grocery prices cut into its sales growth.

Profit amounted to $1.77 a share in the period, which ended Aug. 28, the Issaquah, Washington-based company said in a statement. Analysts had estimated $1.73 a share, according to data compiled by Bloomberg.

Costco has been working to control costs after wage increases and food deflation put more pressure on its bottom line. Chains are locked in a price war, especially over staples such as meat and dairy. But Costco has weathered the challenges better than some rivals, including Wal-Mart Stores Inc. and Target Corp.

Costco rose as much as 2.7 percent to $151.45 in early trading after the results were released. Through Thursday’s close, the stock had gained 2.6 percent over the past 12 months.

Credit Cards

The chain’s same-store sales -- a closely watched measure -- rose 3 percent when gas and foreign-exchange fluctuations are excluded. U.S. sales were hurt in part by the company switching its store credit card to Visa from American Express in June. Credit cardholders complained they hadn’t received the new card or faced long wait times to activate it.

Total revenue amounted to $36.6 billion, just shy of the $36.9 billion that analysts estimated.

Costco, with a $55 membership fee, tends to cater to slightly higher income customers. While those shoppers have fared better during the economic recovery, there have been some signs this year they are pulling back over concerns about the election and volatility in the stock market.

But Costco continues to open additional locations. The company plans to add nine of its warehouse-style stores, including a relocation, before the end of 2016.

News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.

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