March 4, 2009

Costco is not immune from the recession

Costco Wholesale Corp.'s second-quarter earnings fell 27%, while the quarterly profit generated by rival BJ's Wholesale Club Inc. rose 4.8%, financial results showed this week.
Costco's profit for the second quarter ended Feb. 15 fell more than expected. Shares of Costco, down 23% so far this year. The results reflected lagging demand for non-food items and increased discounts and price reductions to attract budget-conscious shoppers. Quarterly profit at Costco fell to $239.7 million, or 55 cents a share, from $327.9 million, or 74 cents, earned in the year-earlier second quarter. Total revenue, reflecting membership fees, eased to $16.84 billion from $16.96 billion, off 0.7%. Costco also cut prices or held back increases in an intense industry fight for market share with rivals including the Sam's Club. The recession and rising job losses also have led shoppers to cut back on bulk purchases

BJ's Wholesale (a Costco competitor only on the east coast) came in with financial results that exceeded expectations and reported fourth-quarter profit rose 4.8% to $52.7 million, or 91 cents a share, from $50.2 million, or 80 cents, earned in the same period a year earlier.

Big Lots (another Lakewood retailer) said fourth-quarter profit fell 14% to $78.8 million, or 96 cents a share, from $92 million, or $1.04, a year earlier.

So the verdict is still out on Costco at the mall. Customer traffic has been brisk the first week but we will want to see how that holds up once the novelty wears off. Plus this store is just cannibalizing traffic from the Norwalk and Long Beach Costcos. The state of retail will likely undergo a metamorphosis in the next 12 months. Who knows what Lakewood retail will look like by then.

Lakewood Accountability Action Group™ LAAG | | Lakewood, CA
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