Costco reported strong first-quarter earnings yesterday, with profit up 21 percent and revenue gaining 10 percent from last year. The warehouse-club chain's profit of 40 cents...
Costco reported strong first-quarter earnings yesterday, with profit up 21 percent and revenue gaining 10 percent from last year.
The warehouse-club chain’s profit of 40 cents a share met analysts’ expectations, but that wasn’t enough for investors, who at one point yesterday traded the stock down $1.85 a share.
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It recovered much of that decline to close at $48.10, off 80 cents.
Chief Financial Officer Richard Galanti tried to take Wall Street’s reaction in stride.
“What I lose sleep over, and it’s not a lot frankly, is as it relates to the short-term stock-price movement,” he said. “As you’d expect with any stock that’s done well, the sell-side guys want to look at it and say, ‘The cup is half empty.’ “
Stephanie Hoff, senior retail analyst for Edward Jones, pointed out Costco shares had moved up before the earnings announcement and that “because it didn’t beat earnings projections like it had for the past couple quarters, there’s some profit-taking occurring.”
Indeed, the stock price rose steadily throughout the fall.
Bob Toomey, an analyst with RBC Capital Markets, blamed Costco’s drop yesterday on widespread market concern over disappointing unemployment figures.
Expenses of the Issaquah-based retailer also have been a concern, and some analysts said costs were still too high in the first quarter. Overhead costs totaled $1.13 billion, up 9.6 percent from a year ago.
But, Toomey said, “They’re making progress.”
Costco’s total revenue climbed 10 percent to $11.58 billion, including $238.1 million in membership fees and sales of $11.34 billion. Sales at warehouses open at least a year, known as same-store sales, rose 7 percent.
Consumer electronics are flying off the shelves, Galanti said, which he attributes to “cooler, neater stuff at lower prices.” Flat-screen televisions and digital cameras are hot, as are certain upscale-clothing items, such as cashmere coats and sweaters.
Less popular than expected are seasonal items, such as holiday lights and wrapping paper, Galanti said.
And the media category which includes movies, books and CDs is not selling as well as last year, when people were rushing to buy “Finding Nemo” and other hits.
Costco’s pharmacy and gasoline sales continue to grow at a faster rate than the company overall, he said.
At the end of the first quarter, the chain had 365 pharmacies, and gasoline was sold at 215 of its 449 stores.
Costco expects to open 24 stores this fiscal year, many in the summer. It opened four during the first quarter.
Melissa Allison: 206-464-3312 or firstname.lastname@example.org