Costco Wholesale Corporation (COST 206.92, -19.59, -8.65%) reported
first quarter adjusted earnings of $1.67 per share after the close yesterday,
which came in above expectations.
Looking at the top line, revenues, which includes total sales and membership fees, rose 10.3% year/year to $34.31 bln but fell just a bit short of expectations. Revenue from membership fees rose 10% year/year.
The company also reported comparable sales of +8.8%, or, +7.5% on an adjusted basis, which falls in-line with what the company reported in its monthly sales report on December 6.
Separately, investors are focused on margin weakness, which is helping to weigh shares down this morning. Operating margins fell to 2.7% in the quarter, down from 3%. Gross margins fell to 10.75% from 11.25% a year earlier.
One item that hurt margins was higher merchandising costs, which grew a bit faster than did sales on a year/year basis.
Also, the company’s Fresh Foods segment has seen a bit more retail competition out there from supermarkets and other wholesalers, such as Walmart’s Sam's Club (WMT). The company just passed the one-year anniversary of its grocery store delivery service, launched last October.
Costco currently operates 768 warehouses, including 533 in the U.S. and Puerto Rico, 100 in Canada, 39 in Mexico, 28 in the United Kingdom, 26 in Japan, 15 in Korea, 13 in Taiwan, 10 in Australia, two in Spain, one in Iceland, and one in France.
In current trade, shares of COST are down by more than 8%.
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