Costco Earnings Weaker Than Expected but Investors Still Happy

Even though Costco Wholesale Corp.'s (Nasdaq: COST) revenue was slightly less than expected by Wall Street, investors still reacted positively to increased sales for its fiscal fourth quarter.

Revenue at stores opened at least a year rose 3 percent, below the 3.7 percent gain that was anticipated by Wall Street. Plus, the chain of 638 club stores posted a 1.3 percent increase in quarterly profits.

At the same time, the company's comparable sales for the quarter increased 5 percent. Net income for the quarter was $617 million, or $1.40 per diluted share, compared to $609 million, or $1.39 per diluted share, for the same quarter last year.

In addition, Costco announced plans to open 36 new stores this fiscal year, including its first two locations in Spain. Costco stock closed up 1.1 percent at the close of market on Thursday to $115.70.

In a conference call with analysts, Costco's CFO Richard Galanti emphasized the success of the warehouse retailer's low pricing strategy, including on its popular rotisserie chickens. The retailer sells 60 million chickens a year by maintaining a price of $4.99 each, even when commodity prices rise.

"I think we do better when we're reducing prices and driving business. And overall, that's good for us—better than for others," Galanti said on the call, Bloomberg Businessweek reported.

For more, see:
This Retailing Today article
This Bloomberg Businessweek article
This Reuters article

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