Costco sales jump not high enough to reach forecast

Costco Wholesale gave investors a glimpse into how it fared in a challenging retail environment heading into the holiday season as the largest U.S. warehouse-club chain, reported fiscal first-quarter profit that trailed analysts’ estimates even as sales climbed as it offered greater discounts.

Analysts were off on target, predicting Costco would step up the pace in profit growth it saw in Q4 and would also show an acceleration in its top-line gain as well. Experts, polled by Thomson Reuters expected it to see an 8% rise in earnings to $1.03 a share. They forecast revenue, including membership fees, was going to grow 7.2% to $25.4 billion after a 1% increase the prior quarter.

Net income in the quarter ended November 24 rose to $425 million, or 96 cents a share, from $416 million, or 95 cents, a year earlier, the Issaquah, Washington-based company said today in a statement. Analysts projected profit of $447.5 million, according to data compiled by Bloomberg.

Lower gasoline prices and weak foreign currencies dampened a five percent increase in the companys monthly net sales. Sales at stores open at least a year rose 2% in the four weeks ended December 1, including the impact of fuel sales and foreign exchange. November net sales rose 5% to $8.78 billion.

“Costco sales have been up and down this year and were hurt by falling gas prices,” Ken Perkins, president of Retail Metrics. noted in a report.

Excluding the negative impact of foreign exchange and falling gasoline prices, same-store sales rose 4%.

For the twelve-week first quarter ended November 24, the company reported net sales of $24.47 billion, an increase of five percent.

Costco, which main competitor is BJs Wholesale Club Inc and Wal-Mart Stores Incs Sams Club, offers everyday items like bananas below supermarket prices, hoping customers will buy other goods as well. It usually prices gasoline lower than competing stations.

The 22 analysts polled by CNN Money offering 12-month price forecasts for Costco Wholesale Corp have a median target of 123.50, with a high estimate of 144.00 and a low estimate of 90.00. The median estimate represents a 5.29% increase from the last price of 117.30. Most investment analysts advice to hold stock in Costco Wholesale Corp.