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Costco To Miss Wall Street Expectations
Higher energy costs to cut into profits
The Associated Press
July 23, 2008, 7:44 AM PDT
Costco Wholesale Corp. said Wednesday
fiscal fourth-quarter and full-year profit will miss Wall Street
expectations, as the warehouse club operator expects higher energy
costs to crimp its bottom line.
The company also said it would expand its stock repurchase plan
by $1 billion.
For the fourth quarter, analysts polled by Thomson Financial
expect $1 per share in profit, and Costco said it expects earnings
"well below" this estimate. Analysts expect full-year earnings of
$2.99 per share, according to Thomson.
"Factors negatively affecting our fourth quarter earnings
outlook arise largely from inflation, particularly as to energy
costs," Costco Chief Financial Officer Richard Galanti said in a
statement.
The outlook reflects weakness in the company's gasoline
operations and slightly lower-than-planned merchandise profits as
the company holds back on price increases to drive sales.
Galanti also said a greater-than-anticipated LIFO charge, which
refers to the last-in-first-out method that assumes the most recent
inventory purchases or goods manufactured are sold first. During
times of rising prices, that results in an charge that eliminates
inflationary profits from net income.
The company also said its board expanded its buyback plan by up
to $1 billion, which is in addition to the $5.8 billion already
authorized, and it declared a quarterly cash dividend of 16 cents,
payable on Aug. 22 to shareholders of record on Aug. 8.
The company will report fourth-quarter and fiscal year results
on Oct. 8.
Copyright © 2008, The Associated Press
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