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Costco Stocks Tumble on Profit Report

Costco Wholesale Corp. trimmed its fourth-quarter earnings this week, citing weak margins, sending its shares sharply lower. The Issaquah, Washington-based wholesale retailer gave few details on why its profit margins were far below expectations, leaving analysts waiting for a further explanation which was expected to come from a late-morning conference call, to be held with Costco`s management. Costco officials said the company remained "positive" in its outlook for the next fiscal year, but declined to give a specific forecast.

Costco Corp. said it expects to make only 68 to 71 cents a share for the fourth quarter. In May of this year, business analysts expected share prices for Costco for the fourth quarter to be making a revenue of about 77 cents. The company said that the quarter, ending on Sunday, September 3rd, did reveal that will take a 3-cent-a-share hit on its foreign income tax assessment reserves. Still, the news was hardly all disappointing: Costco said its total sales in August rose 11% from a year ago, to $4.55 billion.

The U.S. warehouse club retailer has struggled with weak margins from its gasoline business in recent quarters. "We don`t know how much (of the margin pressure was) from gasoline or from other classifications," Lazard Capital Markets analyst Todd Slater wrote, in a note to Lazard clients. "With the stock priced for perfection...we expect it to come under considerable pressure this morning but then stabilize following the Costco conference call."