COST 2009 Q2 Earnings - by BetterTrades

Before the markets opened Wednesday morning, membership warehouse operator Costco Wholesale Corp. (COST) affirmed that the company's earnings during the 2Q declined amidst lower sales totals and the decline in gas prices.

For the recent quarter, Costco posted net income of $239.7M, or $0.55 per share, in sharp contrast to last year's earnings of $327.9M, or $0.74 per share, a decrease in profits of nearly 27%. In January, the discount retailer cautioned investors that the company could miss market expectations substantially as a result of declining sales and margins. With the warning, Costco did not offer any foresight into the company's performance expectations for the remainder of the year.

Meanwhile, overall sales for the period slipped as well, albeit marginally, falling from $16.96B to $16.84B. Despite the decrease in sales, membership fees increased year-over-year, climbing from $342.92M to $355.63M, an increase of just under 4%. On average, analysts were looking for Costco to post quarterly earnings of $0.70 per share on overall sales of $18.85B.

Furthermore, same store sales dropped 3% overall during the quarter, as domestic sales slipped 1%, while international sales plunged 11% across the board. The company's sales figures were hurt by the decline in gasoline prices and the unfavorable exchange rates overseas. Excluding these circumstances, comparable sales would have posted a gain of 5%, with international sales increasing by 8%.

In a statement from the CEO of Costco, Richard Galanti stated, "Second quarter 2009 earnings results were negatively impacted by a variety of factors, primarily centered around overall weak economic conditions. In particular, our quarterly results were hurt by the continued weakness in non-foods sales and related margins."

Galanti went on to state that, "Margins in foods and non-foods were also negatively affected by increased pre-holiday seasonal markdowns and other selective price reductions to drive sales and increase market share. In addition, results were hurt by lower year-over-year gasoline profits and lower reported international profits, the latter a result of the significant strengthening of the U.S. dollar when compared to the currencies of Canada, the United Kingdom, Korea and Mexico."

For the first two quarters of the year, Costco has posted net earnings of $502.24M, or $1.14 per share, down from last year's performance of $589.83M, or $1.33 per share during the first two quarters of 2008. Revenues during these six months grew to $33.24B, up from $32.77B a year ago.

With retailers releasing their monthly sales figures for February just a week or so ago, Costco showed a decline in sales for the four-week period, posting a decrease of 1% to $5.06B, down from last year's totals of $5.13B.

Although the company did not release upcoming projections, analysts believe that Costco will post yearly earnings of $2.68 per share, on average. Other analysts have predicted the company's earnings to range between $2.60 and $2.90 per share.

Over the past year, shares of Costco have ranged between $41.83 and $75.23 per share. By the end of Wednesday's trading session, shares of COST were fluctuating between positive and negative territory before finally finishing in the green, adding $0.12, or 0.3%, to end at $40.81 per share.

By BetterTrades