Bulk-sized retailer Costco
Quarterly sales clocked in at $21.89 billion, a moderate 3% slip from the year-ago period. For the full year, sales were down 2% to $69.89 billion. Earnings per share sagged from $2.89 in fiscal 2008 to $2.47.
Focusing on its most recent profit, fourth-quarter EPS registered $0.85 versus $0.90 in the same period last year, a 5.6% slide. However, stripping out inventory-related and one-time items in both quarters, EPS took a much larger 14.4% hit. Interestingly, that performance compares unfavorably to all-in-one retailer Target's
The discrepancy may be surprising, given Costco's image as a jumbo discounter built to excel in tough times. But company financial performance -- especially in the short term -- hinges on behind-the-scenes elements, in addition to more visible factors such as product mix and customer focus. In this case, lower interest income, higher employee benefit costs, and foreign exchange pressured Costco's bottom line. On a positive note, gross margin excluding gasoline sales, which can cause significant swings, was up slightly for the second consecutive quarter.
Citing an unpredictable environment, management declined to offer financial guidance. However, if August and September comps are any clue, things are looking up. Excluding the effects of currency and gasoline deflation, August same-store sales rose 2%, only to be bested by a 4% rise in September. Management speculated that the September gain involved a bit of a Labor Day lift, along with a boost from coupon mailers. Also, back-to-school restocking was likely a positive contributor.
Meanwhile, low-cost retailer Family Dollar Stores
Yet for the moment, Costco consumers appear more outgoing: All four of the company's merchandise categories saw positive September comps. Regarding the performance of "hard lines" and "soft lines" -- categories that include major appliances and jewelry -- management remarked that it was "the first time since over a year ago that these departments had comp sales figures without a negative sign in front of them."
In my view, it's still too early to celebrate a consumer recovery, especially with housing headwinds still brewing on the horizon. Any uptick in November and December comps will likely draw investors deeper into more purely discretionary names such as J. Crew
But let the masses do their thing. Sticking with Costco -- even though its profit growth might lag that of Wal-Mart Stores
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