Costco blames sales drop on lower gas prices

Costco Wholesale Corp. reported its first quarterly decline in same store sales since 2009, although profit at the club store did rise.

Same store sales declined 1% in the third quarter ended May 10, including fuel and foreign currency impacts. This was below the 0.7% growth expected by analysts. The company said sales were hurt by low gas prices and a stronger dollar that reduced the value of sales from overseas markets.

The news is out of character for Costco but follows a slew of other retailers reporting lackluster results for the first quarter. However, some analysts remain upbeat about Costco.

“Assuming there are no unusual items (none mentioned in the press release), the gross margin gains underscore that Costco operates a healthy business,” said William Blair analyst Mark Miller. “Costco remains one of the select few retailers that are winning on all fronts as the customer migrates to e-commerce: growing its own e-commerce business nearly twice the market rate, generating twice the profit margins with e-commerce compared with the rest of the domestic club business, and generating larger market share gains from other retailers that have been forced to slow their own store growth, or close stores.”

Net income attributable to the company rose to $516 million, or $1.17 per share in the third quarter ended May 10 from $473 million, or $1.07 per share, a year earlier. Revenue rose 1% to $25.52 billion.

Costco currently operates 673 warehouses, including 474 in the United States and Puerto Rico, 89 in Canada, 35 in Mexico, 26 in the United Kingdom, 20 in Japan, 11 in Korea, 10 in Taiwan, seven in Australia and one in Spain. The company plans to open up to an additional 15 new warehouses (including one relocation to a larger and better-located facility) prior to the end of its fiscal year on Aug. 30, 2015. Costco also operates electronic commerce web sites in the U.S., Canada, the United Kingdom and Mexico.