With spring fast approaching, warehouse retailer Costco (Nasdaq: COST) did its best to put a spring in investors' step with its second-quarter financial results. But even for discounters, times are tough these days.

Costco's Q2 net income increased 25%, to $299 million, or $0.67 per share. Revenue surged 11%, to $18.36 billion. However, same-store sales increased just 3% in the quarter, with a 10% increase in international comps. On a sequential basis, comps have stalled after last quarter's move in the right direction:

Costco's same-store sales (excluding gas and currency effects):

Q4 (Aug. 30, 2009)

Q1 (Nov. 22, 2009)

Q2 (Feb. 14, 2010)




Source: Company press releases.

Costco missed analysts' earnings expectations by $0.02 per share, even as it managed to increase gross margins by 26 basis points, to 10.7%. Still, a double-digit percentage increase in revenue, as well as a sizeable profit gain in the quarter, seems like pretty good news for the long haul. Warehouse rival BJ's Wholesale (NYSE: BJ) also delivered quarterly results that disappointed investors, but just by a penny. Big Lots (NYSE: BIG) beat expectations and gave rosy guidance.

Although discounters seem like good defensive stocks in the current sluggish economy, price deflation in food and electronics has investors worried. Those fearsome factors also dragged on Wal-Mart's (NYSE: WMT) most recent quarter.

Meanwhile, everyone in the grocery biz, from Safeway (NYSE: SWY) to Whole Foods Market (Nasdaq: WFMI), is trying to provide value propositions for skittish, budget-conscious consumers. That push will only create greater pressure on margins for retailers across the board.

I've long been a fan of Costco as a company and a stock; I even nominated it as The Best Stock for 2010. However, Costco's solid reputation and great management team also place a premium price on the stock. It trades at 19 times next year's earnings, while Wal-Mart and BJ's have forward P/Es of around 13.

Still, Costco's well-managed business suggests it may be worth the premium. The customer goodwill and competitive savvy it enjoys should ensure growth over the long haul.

Should investors empty their carts of Costco, or are near-term worries overblown? Discuss the warehouse retailer in the comment box below.

Costco and Wal-Mart are Motley Fool Inside Value recommendations. Costco and Whole Foods Market are Stock Advisor picks. The Fool owns shares of Costco. Try any of our Foolish newsletter services free for 30 days.

Alyce Lomax owns shares of Whole Foods Market. The Fool has a disclosure policy.