Costco Up after Results

Costco Wholesale Corp. (NASDAQ:COST) shares are steady in morning trade after the company reported earnings for its second quarter above analyst forecasts. Revenues also came in above analyst forecasts.

The company said net sales for the quarter increased ten percent, to $22.97 billion, from $20.45 billion last year. This beat analyst forecasts that were looking for $22.83 billion in revenues. Net sales for the first half increased eleven percent, to $43.69 billion, up from $39.27 billion last year.

Net income for the quarter was $394 million, or $.90 per diluted share, compared to $348 million, or $.79 per diluted share, last year. This exceeded analyst forecasts by 3 cents a share. Net income for the first half was $714 million, or $1.62 per diluted share, compared to $660 million, or $1.49 per diluted share, last year.

The company’s results were helped by a better-than-expected 8 percent rise in January sales at stores open at least a year, a key metric of retailer health, helped by higher gasoline prices. Analysts were expecting same-store sales to rise 6.1 percent factoring in higher gasoline prices. While rising gasoline prices have driven shoppers to buy the company’s cheaper gasoline, this also has hurt the company’s profit margin. The company also raised its membership fees for the first time in five years in November 2011.

“Best in class traffic and (comparable sales) reflect the strength of Costco low cost model and core upper income shopper,” said Greg Melich of ISI Group. But “Frequency gains come at a cost. Costco is winning trips and driving productivity consistent with its strategy. That said, a fourth straight quarter of gross margin erosion shows top line gains come at a cost.”

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Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.