Costco Profit Falls as Demand Wanes From Wealthier Shoppers

  • Second-quarter net income drops 8.7 percent, below estimates
  • Company has been hurt outside the U.S. by stronger dollar

Low Gas Prices Hurt Costco Sales

Costco Wholesale Corp. posted second-quarter earnings that trailed analysts’ estimates as higher-income shoppers show signs of curtailing spending.

Net income fell 8.7 percent to $546 million, or $1.24 a share, the Issaquah, Washington-based company said Wednesday in a statement. Analysts estimated $1.28 a share, on average. Same-store sales in the U.S., a closely watched measure by investors, increased 4 percent excluding the negative impacts from gasoline price deflation and foreign exchange, compared with an estimate of 4.9 percent.

After outpacing its rivals last year, Costco’s growth has slowed in recent months. With a $55 annual membership fee, the second-largest U.S. retailer tends to cater more to higher-income shoppers, who are curtailing spending after recent drops in the stock market. Outside the U.S., Costco’s sales have been hurt by the strengthening dollar, particularly in Mexico, where Costco has 36 clubs.

“The abrupt and sharp deceleration in comp sales is of deep concern broadly and is likely a bad omen for staples retail generally,” said Scott Mushkin, an analyst with Wolfe Research, in a note to clients earlier this month after Costco said its January sales came in below expectations.

Costco fell 0.8 percent to $151.60 at the close in New York. The stock has lost 6.1 percent this year.

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