May 28 (Bloomberg) -- Costco Wholesale Corp., the largest U.S. warehouse-club chain, said third-quarter profit fell 29 percent after consumers cut spending, the company incurred a charge for litigation and a higher dollar hurt overseas sales.

Net income dropped to $209.6 million, or 48 cents a share, from $295.1 million, or 67 cents, a year earlier, the Issaquah, Washington-based company said today in a statement. Revenue fell 5 percent to $15.5 billion. The retailer had a $34 million charge to settle litigation about its membership renewal policy, according to the statement, which didn’t give more detail.

Sales of goods besides food have waned as Costco shoppers cut back to cope with the recession. Chief Financial Officer Richard Galanti also said more staff use of the company health plan hurt earnings, as did the higher dollar, which reduced the value of profits made in Canada, the U.K., Korea and Mexico.

The retailer suffered from “ongoing weakness in sales, particularly sales of higher-ticket, discretionary items,” Galanti said.

Costco fell 86 cents, or 1.8 percent, to $47.97 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have lost 8.6 percent this year.

Sales at Costco stores open at least a year fell 7 percent in the quarter, with a 5 percent drop on that basis for U.S. sales and a 12 percent decline abroad. Excluding effects of lower gas prices and foreign-exchange movements, same-store sales were up 2 percent for Costco as a whole, unchanged in the U.S. and up 8 percent for international stores.

Analysts anticipated profit, excluding some items, of 54 cents a share, the average of 18 estimates compiled by Bloomberg. Analysts put sales at $16.2 billion, on average.

Sam’s Club Comparison

Shoppers visit Costco’s 555 warehouse clubs for discounts on jewelry, designer goods and gourmet food along with basic groceries.

Excluding fuel, comparable-store sales at Wal-Mart Stores Inc.’s Sam’s Club, the second-biggest U.S. warehouse chain, rose 4.2 percent in the quarter ended April 30. Customers spent more on meat, produce and baked goods and less on big-ticket items such as furniture and jewelry, Sam’s Chief Executive Officer Brian Cornell said on a recorded conference call May 14.

BJ’s Wholesale Club Inc., the third-largest U.S. warehouse retailer, said May 20 that quarterly net income rose 42 percent from a year earlier and boosted its annual profit forecast.

To contact the reporter on this story: Keith Campbell at k.campbell@bloomberg.net; Lauren Coleman-Lochner in New York at llochner@bloomberg.net.

Last Updated: May 28, 2009 16:11 EDT