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Costco Posts Mediocre Results

Costco Wholesale's earnings were not particularly impressive. The big-box retailer posted numbers that show its expansion has come down to earth.

By Douglas A. McIntyre
Published March 3, 2016, 4:46am ET · 2 min read

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The last quarter and first half of Costco Wholesale Corp.’s (NASDAQ: COST) earnings were not particularly impressive. The big-box retailer, once viewed as a better version of Wal-Mart Stores Inc. (NYSE: WMT), posted numbers that show its expansion has come down to earth:

Net sales for the quarter increased three percent, to $27.57 billion from $26.87 billion last year. Net sales for the first half increased two percent, to $54.19 billion from $53.16 billion last year.

Better than Wal-Mart, but not by much. The numbers also open the issue of whether online commerce, particularly Amazon.com Inc. (NASDAQ: AMZN), something that does not appear to have hurt Costco badly in the past, has begun to undermine its results. Costco has one advantage that helps offset stagnant sales. It charges a fee for members to shop at Costco locations.

The bottom line was also short of impressive:

 Net income for the quarter was $546 million, or $1.24 per diluted share, compared to $598 million, or $1.35 per diluted share, last year. Net income for the first half was $1,026 million, or $2.32 per diluted share, compared to $1,094 million, or $2.47 per diluted share, last year.

Comparable store sales were decent in the United States but poor outside the country.

Comparable sales for the 12-week and 24-week periods were as follows:

12 Weeks 24 Weeks
U.S. 3% 3%
Canada -7% -8%
Other International -3% -4%
Total Company 1% 0%

All and all, not much to leave investors optimistic.

Shares closed Wednesday at $152.79, within a 52-week trading range of $117.03 and $169.73.

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Douglas A. McIntyre

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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