December 11, 2009 in Business

Costco’s flat profit laid to low prices

Sales volume rises; buyers still cautious
Sarah Skidmore Associated Press

Deal reached

Coca-Cola Co. products will soon be available again in Costco stores now that a pricing dispute with the wholesale club operator has been settled.

Last month, Costco decided not to order any more products made by the Atlanta-based company until the squabble was resolved. The retailer made the dispute unusually public.

Coke will be back on shelves around Monday, Costco CFO Richard Galanti told investors during the company’s earnings conference call Thursday. He did not comment further on the matter.

PORTLAND – Costco Wholesale Corp. says shoppers continued to flock to its stores in its first quarter and sales rose, but lower gas and food prices hampered the warehouse club operator’s profit.

Costco, based in Issaquah, Wash., on Thursday reported nearly flat earnings for the quarter that ended Nov. 22. The company earned $266 million, or 60 cents per share, compared with $263 million, or 60 cents per share, a year earlier.

Costco has been one of the stronger retailers during the economic downturn, as shoppers focus on prices and limit their spending to necessities such as food. But dropping prices on goods like meat and produce hurt its profit, as those changes are typically passed through to shoppers.

Company leaders said overall sales trends have improved, though they suffered by comparison with last year, when gas prices were higher.

Revenue rose 6 percent to $17.3 billion as more shoppers joined its clubs and net sales grew 5.5 percent to $16.92 billion.

The results were on par with analyst expectations.

Chief Financial Officer Richard Galanti said shoppers are slowly starting to buy more nonfood items, such as clothing and housewares, but continue to spend modestly as the holidays approach.

Edward Jones analyst Matt Arnold said shoppers still aren’t splurging for some things Costco sells, but the company is well-positioned for the holiday season.

“Costco is in an attractive spot in terms of retail when you think about the value-conscious consumer,” Arnold said. “They certainly will be able to hold their own and do well in the holiday season.”

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