Shares of warehouse club retailer Costco(Nasdaq: COST) are on sale today by about 5%, hovering just above their 52-week low.

Behind the bruising is the company's second-quarter earnings report, which didn't live up to expectations because of a charge taken to cover workers' compensation claims.

The purveyor of giant packs of toilet paper and economy-size jars of pickles earned $182.1 million, or $0.39 a share, in the quarter ended Feb. 16. In the prior period, Costco netted $192.6 million, or $0.41 per share. Analysts were anticipating $0.43 a share.

The retailer bulked up its reserves for workers' comp claims, taking a pre-tax charge of $26 million. After tax, it affected earnings by $16 million, or $0.03 a share.

The company pinpointed rising claim costs, primarily in California, as the main reason for the charge. Only a third of Costco's U.S. employees work in the state, and injuries there are proportional to the workforce's size. But claims from California alone account for more than two-thirds of all claims costs. That's a painful trend that isn't likely to reverse anytime soon.

It's not all bad news, though. Costco's sales for the quarter did improve by 8% to $9.92 billion. Including membership fees, it booked revenues of $10.11 billion. Quarterly same-store sales were up 4%.

The company also reported February sales results: Comps increased by 6% during the month, with total sales up 10%. In addition, Costco backed earnings guidance for the remainder of its fiscal year.

Costco was featured by Tom Gardner in the May 2002 and August 2002 issues of Motley Fool Stock Advisor.