Costco 1st-quarter profit nearly flat as gas, food prices fall but sales improve

Costco 1Q profit nearly same as a year ago

PORTLAND, Ore. — Costco Wholesale Corp. says shoppers continued to flock to its stores in its first quarter and sales rose, but lower gas and food prices hampered the warehouse club operator’s profit.

Costco, based in Issaquah, Wash., on Thursday reported nearly flat earnings for the quarter that ended Nov. 22. The company earned $266 million, or 60 cents per share, compared with $263 million, or 60 cents per share, a year earlier.

Costco has been one of the stronger retailers during the economic downturn as shoppers focus on prices and limit their spending to necessities such as food. But dropping prices on goods like meat and produce hurt its profit as those changes are typically passed through to shoppers.

Company leaders said overall sales trends have improved, though they suffered by comparison with last year when gas prices were higher.

Revenue rose 6 percent to $17.3 billion as more shoppers joined its clubs and net sales grew 5.5 percent to $16.92 billion.

The results were on par with analyst expectations.

Chief Financial Officer Richard Galanti said shoppers are slowly starting to buy more nonfood items, such as clothing and housewares, but continue to spend modestly as the holidays approach.

Edward Jones analyst Matt Arnold said shoppers still aren’t splurging for some things Costco sells, but the company is well-positioned for the holiday season.

“Costco is in an attractive spot in terms of retail when you think about the value-conscious consumer,” Arnold said. “They certainly will be able to hold their own and do well in the holiday season.”

Sales at Costco’s stores that have been open at least a year, an important measurement for retailers, rose 3 percent. Much of that growth was from overseas business as the weaker dollar translated to gains when those currencies were converted back. This was a significant improvement from the previous quarter, when the figure fell 5 percent.

Sales at stores open at least a year are a key indicator of retailer performance because they exclude stores that opened or closed during the year.

The company said it plans to add 16 to 18 stores in fiscal 2010. One of the nation’s largest wholesale club operators, it has 566 worldwide.

Shares of Costco rose 10 cents to close Thursday at $58.76.

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AP Retail Writer Michelle Chapman contributed to this report from New York.