UPDATE: Costco 2Q Net Down 27% On Gas Deflation, Price Cutting
2009年3月5日 - 4:36AM
Dow Jones News
Falling gasoline prices, weaker sales of big-ticket
discretionary items and price cuts aimed at boosting customer
traffic in stores combined to send Costco Wholesale Corp.'s (COST)
fiscal second-quarter net income down 27%.
But Chief Financial Officer Richard Galanti said Costco's moves
to cut prices, in some cases even before it realized benefits from
falling commodity prices, helped bring members into stores more
often and improved the discount club retailer's inventory
position.
The approach is also improving customer loyalty and contributing
to "underlying" sales growth, or sales excluding the impact of
foreign currency exchange and falling gasoline prices, Galanti said
during a conference call.
"While our members are buying a little less each visit, they're
coming in more frequently," he said.
For the quarter ended Feb. 15, Costco posted net income of
$239.7 million, or 55 cents a diluted share, down from $327.9
million, or 74 cents a share a year earlier.
Revenue for the second quarter declined to $16.84 billion from
$16.96 billion a year earlier as same-store sales fell 3%.
Excluding gasoline deflation and foreign currency impacts,
same-store sales would have increased about 5%, Galanti said.
When gasoline prices were more than 40% higher a year ago,
gasoline sales volumes also increased as motorists filled up more
frequently to limit future pain at the pump. Galanti said he and
others worried that motorists would fill up less frequently as
prices have fallen. "To our pleasant surprise that did not occur"
in February, and sales volumes improved, he said.
And membership renewal rates have remained strong, "essentially,
at all-time highs," Galanti said. Both trends support his view that
Costco is gaining customer loyalty despite sacrificing some
margins.
Warehouse and discount retailers like Costco - known for selling
big packages of household goods - have held up better in the weak
economy as consumers seek to spend less, but they haven't been
immune to the global recession. But the ongoing focus by shoppers
on basic necessities like groceries and health and beauty aids
rather than the more discretionary, expensive items like jewelry
and furniture that have been Costco's strength in recent years
means the retailer has had to adjust.
Shares of Costco rose 0.8% to $41.02 in recent trading.
"We believe management has clearly signaled that it will
sacrifice margin to protect both its membership renewal rates and
sales trends," Morgan Stanley said in a note to clients. "While
food sales remain strong, comps here could slow as inflation cools,
and we see risk to further declines in discretionary
categories."
Costco warned last month that earnings would fall "substantially
below" analysts' estimates as January same-store sales in the U.S.
were flat, and down 9% in foreign stores.
Galanti said Wednesday that sales trends are still a story of
"haves and have-nots."
"Food, sundries, health and beauty aids continue to be
positive," he said. "Generally, nonfoods - hardlines and softlines
- are in the have-nots category." One exception has been
televisions, where Costco has seen big unit increases amid falling
average selling prices.
Galanti also said Costco did "fairly well controlling expenses
given the sales weakness," though some analysts believe the
retailer may have room to improve.
Analysts, according to Thomson Reuters, expected earnings of 59
cents a share and $16.9 billion in revenue.
Galanti said he expects weakness during the third quarter in
sales of bigger-ticket items such as patio furniture and grills,
but the retailer planned accordingly and has worked with suppliers
to limit its exposure to markdowns.
In December, Costco - the nation's largest warehouse chain by
sales - cut its 2009 capital expenditure target to $1.5 billion to
$1.6 billion from $1.6 billion to $1.8 billion.
Costco in February also said it would no longer publicly
forecast financial performance for the remainder of its current
fiscal year.
-By Mary Ellen Lloyd, Dow Jones Newswires; 704-948-9145;
maryellen.lloyd@dowjones.com
(Katherine E. Wegert contributed to this report.)
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