Costco Wholesale Corp. (COST) warned Wednesday that its fiscal second-quarter earnings are likely to come in "substantially below" analysts' expectations as sales and margins have been hurt by general economic conditions.

Chief Financial Officer Richard Galanti also said the company wouldn't be issuing earnings guidance for the remainder of the fiscal year "given the uncertainties surrounding the economy, including consumer behavior."

In a statement, Galanti said that margins have been hit primarily in the non-food and merchandise categories because of "aggressive merchandise pricing...to drive sales and increase market share, particularly during the first four weeks of the fiscal quarter."

Analysts polled by Thomson Reuters expect earnings of 70 cents per share when Costco releases its financial statements on March 4.

Following its fiscal first-quarter financial report in December, Costco said it doesn't expect to meet second-quarter projections but the uncertainty around how bad it's going to be sent shares of the warehouse club tumbling 8% Wednesday to $42.43 and weighed heavily on the broader retail sector.

Costco has also been hit by lower year-over-year profits from its gasoline business and the strengthening U.S. dollar, which ate into gains from its international operations.

The company said its wholesale same-store sales fell 2% in January from a year earlier. Same-store sales in the U.S. were flat in the month while international sales were down 9%.

While Costco has held up relatively well in light of the economic downturn, industry watchers said the announcement didn't come as a complete surprise. A painful combination of mounting unemployment numbers and losses in the stock market have weighed heavily on consumers.

"When the consumer is being hurt like this, there aren't a lot of places to hide" and even strong companies will be hit, said Howard Davidowitz, chairman of Davidowitz & Associates, a national retail consulting and investment banking firm based in New York.

"Costco is a bit of a victim of its own success," said FTN Equity Capital Markets analyst Charles Cerankosky. "They have historically done better [with discretionary merchandise] so now when those products aren't moving off the shelves, their bottom line is going to get hurt."

-By Kejal Vyas; Dow Jones Newswires; 201-938-5460, kejal.vyas@dowjones.com