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Costco Tops Third-Quarter Profit Estimates After Cutting Costs

Published on May 26 2016 9:33 AM in Retail tagged: Trending Posts / US / Costco / wholesale

Costco Tops Third-Quarter Profit Estimates After Cutting Costs

Costco Wholesale Corp. posted third-quarter earnings that beat analysts’ estimates after the warehouse club curtailed costs.

Net income rose 5.6 percent to $545 million, or $1.24 a share, the Issaquah, Washington-based company said Wednesday in a statement. Analysts estimated $1.22 a share on average. Same-store sales in the U.S., a closely watched measure, increased 3 percent, excluding the negative impacts from lower gasoline prices and foreign exchange.

The results suggest Costco is weathering a shaky retail economy better than many chains. Macy’s Inc., Best Buy Co. and other companies have given downbeat forecasts in recent weeks. Wal-Mart Stores Inc., though, also posted better-than-projected profit and sales.

Keeping a tighter lid on expenses has helped Costco bolster profit at a time of slowing sales growth. With a $55 annual membership fee, the company also tends to cater more to higher-income shoppers and small businesses.

Still, declining gas prices have weighed on sales because the company sells gas at its stores, and the strong dollar has crimped overseas revenue. Another challenge: The company is transitioning its members’ credit cards to Visa through Citigroup Inc. from American Express, a move analysts have said could hurt membership if customers are unhappy with the transition.

Costco shares rose 1.4 percent to $144.54 in New York on Wednesday, before the results were posted. The stock is down 11 percent this year.

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

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