Costco Wholesale Corp on Thursday said its third-quarter net profit fell 29 percent, as shoppers stuck to buying basics like food and medicine, and pared back discretionary purchases of clothes or jewelry.
Costco, the No.1 U.S. warehouse club, said its profit was $209.6 million, or 48 cents a share, for its fiscal third quarter ended May 10, 2009, compared with $295.1 million, or 67 cents per share, a year earlier.
Quarterly sales fell 5 percent to $15.48 billion, excluding membership fees, which decreased 6 percent to $328.4 million, the company said in a statement.
Analysts had on average expected earnings of 53 cents per share, excluding special items, according to Reuters Estimates.
As the recession curtails household budgets, warehouse clubs like Costco, Wal-Mart Stores Inc's Sam's Club and BJ's Wholesale Club Inc have attracted shoppers looking for low prices on necessities like groceries and toiletries.
Shoppers pay an annual fee to shop in the clubs and get discounts on everything from fresh fruit to flat panel TVs to bulk sized packages of paper towels.
But the clubs are facing greater challenges compared with a year ago when high gas prices drove sales at their fuel stations, and a weak U.S. dollar boosted Costco's international results.
Costco has seen its sales slip recently as shoppers avoid spending on nonessential items, and it has also said that it intends to keep its prices low to win market share, even if that crimps profits.
Same-store sales, or sales at clubs open at least a year, fell 7 percent. Excluding the negative impact from gasoline deflation and foreign exchange, same-store sales rose 2 percent.
The latest third quarter was hit by a pretax charge of $34 million related to a litigation settlement, higher employee benefits costs and lower international profits, Chief Financial Officer Richard Galanti said.
(Reporting by Esha Dey in Bangalore; Editing by David Cowell and Jon Loades-Carter)