Costco shares sink--company says it won't meet forecasts (high gas costs)

[TexasLawyer]

Wednesday, August 30, 2006

Costco shares sink after company says it won't meet forecasts

By ALLISON LINN
AP BUSINESS WRITER

SEATTLE -- Costco Wholesale Corp. said Wednesday it expects fourth-quarter profit to be below analysts' estimates, as sales on items like jewelry and furniture slowed and the company struggled with higher gas prices. The warning sent Costco shares down more than 4 percent.

<snip>

Costco Chief Executive Jim Sinegal said customers also appeared to be wary of buying discretionary items such as furniture and jewelry, perhaps in part because of the pain they are feeling when they go to the pump. The company was forced to reduce costs on some of those big-ticket items, pinching its margins.

Costco also is struggling with the costs associated with people returning big ticket electronic items such as high-end televisions.

<snip>

http://seattlepi.nwsource.com/local/6420AP_Costco_Outlook.html

[OrangeCountyDemocrat]

1. They Got Cocky...

They're one of the bluest companies out there, but they bought into it. Hopefully they can adjust their model before it's too late.

Sounds like they've tried to grab out the higher end market, when their bread and butter was average joe. Now average joe doesn't want the plasma for $3K or the SUV at $40K.

[skids]

2. Yeah they could fix themselves up if only...

...they took a real critical look at what they are stocking versus what people need. A lot of the selections in there really have me scratching my head. What bargain hunter is going to buy a treadmill at COSTCO?

[shanti]

3. costco isn't a bargain "discount" store

it sells QUALITY items, many for resale. that's how it began anyway...

[skids]

8. Up here it is over half groceries...

...which would be great for me, if I cooked, but as it is the selection in other departments is slim and there are several departments that really shouldn't even be there -- their customer demographic has changed and they need to adjust to that.

I like that they pay a decent wage but I just couldn't justify renewing my card this summer -- there wasn't enough in it for me.

[Dr.Phool]

6. I got a good deal there a couple of years ago

On a high quality Nautilus weight rack.

[ender]

4. No, thats not it at all...

Costco has always served the wealthy. Its a dirty little secret that you can outfit your house and family with the very best and pay extremely reasonable prices.

I'm not surprised that returned HDTV's are impacting them. Hell, given their "Return it forever" guarantee, you would be a fool to buy one anywhere else.

It is disconcerting that big ticket items arent moving. The price on their furni\ture is 1/2-1/3 of Retail Furniture store's prices.

[N90ATC]

10. Made In China

The furniture they sell is mostly made in China. Not for my home!

[ender]

15. whatever...

most american mills have closed down.

[bleedingheart]

16. well then for sure you don't shop at Mao-Mart since they finance

the Red Army

[shanti]

25. geez, what isn't anymore?

:shrug:

[shanti]

24. exactly

have you ever been to their website and looked at the furniture? excellent quality. costco is no walmart!

[susanna]

12. I don't think they got cocky...

...their business model IS and always has been on the higher end stuff for less. They could be the figurative canary in the coal mine about what is really happening in the economy.

That said, I still shop there and will continue to do so. Then again I'm an amateur cook and love their food quality.

on edit: expanded info

[KittyWampus]

27. Costco did well enough. The analysts simply projected too high.

[w4rma]

5. A lot of sellers of big screen TVs seem to have this problem.

Folks will "buy" the biggest screen TV they can find for some big party or get together (especially for the Super Bowl) and will return it a day or two after the party is over. Basically getting to loan the TV for a couple of days for free.

[Rose Siding]

7. I really hate to hear this

My (limited) holiday shopping plans just firmed up a bit.

[A HERETIC I AM]

9. Their stock price went down because their PROFIT WAS BELOW

estimates. Meaning they STILL MADE A PROFIT!

What it really means is that Costco stock is now marked down and smart investors will buy it as long as the business model is sound and their balance sheet looks good. Not to worry.

[Duer 157099]

13. Exactly. Buying opp

If I had any money to invest, I'd buy their stock.

I also wonder if this is a prelude to them revising their return policy?

[KittyWampus]

28. THANK YOU. I'm a bit surprised it took this long in the thread for facts

[create.peace]

11. All the employees liked my IMPEACH tshirt so I support them! n/t

[NVMojo]

14. yeah, and like the Housing bursting bubble has nothing to do with it as

Amerikans with ARMs and interest only house payments have to dig deeper to make bulging payments. It's the economy, stoopids. Welcome to Bushworld.

[demo dutch]

17. Agreed!

[PunkPop]

18. Costco's great

The money I save on beer alone pays for my membership.

And I know a lot of my money is not being sent to Repubs (I think they give some to repub pols - what are you gonna do? It's business I guess.)

[nolabels]

22. "The money I save on beer alone pays for my membership"

lol

I like the the way they sell things in bulk packs, it saves a lot of time running back and forth to the store and in turn giving me extra time to throw a few more back :toast:

[AnneD]

19. Once I discovered that there was a Costco in our city

I shop there first. I have saved a bundle and gotten quality merchandise. And some of the employees know what my Crawford Peace House/Camp Casey shirts mean. Gotta love it. I agree, most on Wall Street are foolish. Costco has a solid base. To paraphrase George Bailey" We need this measly old one horse institution, if only to give folks some place to put their money other than Wal-Mart".

[anitar1]

20. I'm with you re Costco.

I love the place and the fact that they are Blue. I shope there twice a month and save money. I know my prices.

[taught_me_patience]

21. Expectations were simply too high

high gas prices curtailing consumer spending are hitting many businesses. However, Costco is a horrible shopping experience. There is never any parking, its hard to find what you're looking for (not enough sales people), checkout lines are long, and they only take American Express! Sorry, I think Costco is contributing to the gluttony of the average American. Who really needs a box of 20 muffins at once?

:shrug:

[shanti]

26. that's why they have special shopping times for businesses

buying wholesale. THEY want the 20 muffins at once! that and super large families (not many of those anymore - besides the dugger family!!)

[warrens]

23. My opinion

Gas is one culprit. People want to make one trip, buy everything, then let the car sit. Lower-assortment stores of all sorts are suffering. Wal-Mart has said that it is getting fewer shoppers at its supercenters, but they are buying more per visit. Costco has a limited SKU count; it doesn't even try to meet all your needs. It just gets the best price on the products it does sell.

It will snap back. People are putting off any luxury purchase for now because everyone is nervous about the economy, heating bills this winter, etc. And god knows, no one is getting a raise these days.

[truthisfreedom]

29. hmph. maybe if they raised their gas prices?

i buy most of my gas at Costco, and it's generally about a dime cheaper than anywhere else in my neighborhood.