Costco sales are weathering price war

Company’s fourth-quarter earnings surpassed estimates amid falling grocery prices

Costco Wholesale Corp. reported fourth-quarter earnings that beat analysts’ estimates, even as falling grocery prices cut into its sales growth.

Profit amounted to $1.77 (U.S.) a share in the period ended Aug. 28, the company said in a statement. Analysts had estimated $1.73 a share, according to Bloomberg.

Costco has been working to control costs after wage increases and food deflation put more pressure on its bottom line. Chains are locked in a price war, especially over staples such as meat and dairy. But Costco has weathered the challenges better than some rivals, including WalMart Stores Inc. and Target Corp.

Through Thursday’s close, the stock had gained 2.6 per cent over the past 12 months.

The chain’s same-store sales — a closely watched measure — rose 3 per cent when gas and foreign-exchange fluctuations are excluded. U.S. sales were hurt in part by the company switching its store credit card to Visa from American Express in June. Credit cardholders complained they hadn’t received the new card or faced long wait times to activate it.

Total revenue amounted to $36.6 billion, just shy of the $36.9 billion that analysts estimated.

Costco, with a membership fee, tends to cater to slightly higher income customers. While those shoppers have fared better during the economic recovery, there have been some signs this year they are pulling back over concerns about the election and volatility in the stock market.

But Costco continues to open additional locations. The company plans to add nine of its warehouse-style stores, including a relocation, before the end of 2016.