Costco profit lags analysts' estimates on higher expenses

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Costco, the largest U.S. warehouse-club chain, posted fourth-quarter profit that trailed analysts' estimates, hurt by higher costs and lower gasoline prices that crimped sales.

Net income in the quarter ended Sept. 1 rose to $617 million, or $1.40 a share, from $609 million, or $1.39, a year earlier, the Issaquah, Wash.-based company said Wednesday in a statement. Analysts projected profit of $1.46, the average of 13 estimates compiled by Bloomberg.

Costco joins retailers from Wal-Mart to Macy's in reporting sales that trailed analysts' projections for their most recent quarters as U.S. consumers restrain spending. The profit miss, Costco's first in eight quarters, came as selling, general and administrative expenses rose faster than some analysts expected and revenue climbed at the slowest pace since 2009.

Higher expenses "could be attributable to continued IT spending and/or healthcare related expenses," David Strasser, an analyst with Janney Montgomery Scott in New York, wrote Wednesday in a note. He recommends buying Costco shares. "Both negative gas prices and negative FX hurt" September comparable- store sales.

Revenue rose 0.8 percent to $32.5 billion, trailing analysts' $32.7 billion average estimate. The gain was the smallest increase since sales fell in the quarter ended August 2009. Selling, general and administrative expenses rose 1.8 percent to $3.1 billion, more than the 0.3 percent increase projected by Strasser.

Costco fell 1.3 percent to $110.75 at 8:45 a.m. in New York. The shares had climbed 14 percent this year through Tuesday, compared with a 16 percent gain for the Standard & Poor's 500 Index.

Sales at stores open for more than a year increased 5 percent in the period, excluding changes in gasoline prices and foreign-currency exchange rates. That compared with an increase of 7 percent on that basis in the third quarter.

Separately, Family Dollar, the second-largest U.S. dollar-store chain, said revenue rose 5.8 percent to $2.5 billion in the quarter ended Aug. 31, trailing analysts' $2.56 billion average estimate.

"The environment was more challenging than expected," Chief Executive Officer Howard Levine said in a statement, without elaborating.

Family Dollar, based in Matthews, N.C., said it would earn $3.80 a share to $4.15 a share in the year ending Aug. 30. Analysts' estimate $4.12.

The shares fell as much as 3.4 percent in early trading.