Retail

Retailers Look Weak: Costco, Family Dollar Earnings

Two major retail chains reported fiscal fourth-quarter results Wednesday morning, and while neither one was a complete dud, they did not set off fireworks either. Costco Wholesale Corp. (NASDAQ: COST) and Family Dollar Stores Inc. (NYSE: FDO) posted results that left investors indifferent at best.

Costco reported earnings per share (EPS) of $1.40 on sales of $31.77 billion. The consensus estimates from Thomson Reuters called for EPS of $1.46 on revenues of $32.82 billion. A clear miss.

Family Dollar Stores posted adjusted EPS of $0.86 on sales of $2.5 billion. The consensus estimates called for EPS of $0.84 on revenues of $2.56 billion. Meh.

Same-store sales for the quarter rose 5% at Costco and were flat at Family Dollar. Costco’s September same-store sales growth of 3% missed a consensus estimate of 3.5% from Retail Metrics and did not meet last year’s same-store sales growth of 6%. Family Dollar Stores missed a fourth-quarter consensus estimate of 2.2% and same-store sales were sharply down from growth of 5.4% in the same quarter a year ago.

Costco did not provide guidance for the 2014 fiscal year. Family Dollar Stores expects full-year EPS of $3.80 to $4.15 in 2014, compared with a current consensus estimate of $4.13. Family Dollar also expects same-store sales for its first fiscal quarter (ending in November) to fall in the low-single-digit range and forecasts EPS of $0.65 to $0.75. That is below the consensus estimate for first quarter EPS of $0.76.

The back-to-school season was weak for all retailers, and consumer confidence heading into the holiday shopping season has been shattered by the federal government shutdown and the threat of a default on U.S. debt. Family Dollar’s weak first-quarter forecast is not encouraging for the holiday season either. Sales of big-ticket items like cars and appliances have been strong, cutting into sales of accessories and apparel and raising concerns that if the spending pattern continues holiday sales will be difficult.

The National Retail Federation said last week that retail sales may increase 3.9% this holiday season, a bit above the 3.5% gain for 2012. Unless consumers feel a lot more confident about the U.S. economy in a few weeks than they do now, it is difficult to see how that increase will materialize.

Shares of Costco are trading down about 1.3% in premarket trading this morning, at $110.75 in a 52-week range of $93.51 to $120.20.

Family Dollar Stores’ stock is trading down more than 3% at $67.30 in a 52-week range of $54.06 to $75.29.

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