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Costco profit drops as demand wanes

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Washington / Bloomberg

Costco Wholesale Corp. posted second-quarter earnings that trailed analysts’ estimates as higher-income shoppers show signs of curtailing spending.
Net income fell 8.7 percent to $546 million, or $1.24 a share, the Issaquah, Washington-based company said in a statement. Analysts estimated $1.28 a share, on average. Same-store sales in the US, a closely watched measure by investors, increased 4 percent excluding the negative impacts from gasoline price deflation and foreign exchange, compared with an estimate of 4.9 percent.
After outpacing its rivals last year, Costco’s growth has slowed in recent months. With a $55 annual membership fee, the second-largest US retailer tends to cater more to higher-income shoppers, who are curtailing spending after recent drops in the stock market. Outside the U.S., Costco’s sales have been hurt by the strengthening dollar, particularly in Mexico, where Costco has 36 clubs.
“The abrupt and sharp deceleration in comp sales is of deep concern broadly and is likely a bad omen for staples retail generally,” said Scott Mushkin, an analyst with Wolfe Research, in a note to clients earlier this month after Costco said its January sales came in below expectations.
Costco shares rose 1.5 percent to $152.79 at the close in New York. The stock has lost 5.4 percent this year.
Costco Wholesale Corporation is an American membership-only warehouse club that provides a wide selection of merchandise. It is currently the largest membership-only warehouse club in the United States.
As of 2014, Costco was the third largest retailer in the US. By 2015 it was the second largest in the world (after Walmart). It’s worldwide headquarters are in Issaquah, Washington.
The company opened its first warehouse in 1983 in Seattle. Through mergers, Costco’s overall corporate history dates back to 1976, when its former competitor Price Club was founded in San Diego, California.
Costco was the first company to grow from zero to $3 billion in sales in under six years. For the fiscal year ending on August 31, 2012, the company’s sales totaled $97.062 billion, with $1.709 billion
net profit.

Costco is 19th on the 2014 Fortune 500. The ACSI (The American Customer Satisfaction Index) named Costco number one in the specialty retail store industry with a score of 84 in 2014.

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