Costco crumbles after profit warning (California Workman's Comp strikes Costco)

CBS Market Watch, ^ | 5 September 2002 | Jennifer Waters

[Grampa Dave]

Costco crumbles after profit warning

By Jennifer Waters, CBS.MarketWatch.com

Last Update: 9:46 AM ET Aug. 5, 2003

CHICAGO (CBS.MW) - Investors unloaded 14 percent of Costco's share value in heavy early trading Tuesday after the wholesale club warned that quarterly profits could dive as much as 18 percent.

Costco (COST: news, chart, profile) shares plunged $5.01 to $31.95.

Hobbled by higher healthcare costs and worker's compensation coupled with lower margins, the Issaquah, Wash.-based retailer slashed its fourth fiscal-quarter earnings outlook to a range of 46 cents to 48 cents a share, down from a previously expected 54 cents to 56 cents a share.

For the full year, the company said it now expects earnings to fall into a range of $1.48 to $1.50 a share compared to a previous target of $1.56 to $1.58 a share. On average, analysts reporting to Thomson First Call had expected Costco to deliver fourth-quarter profits of 55 cents a share and a $1.58 a share for the full year.

Same-store sales last month climbed a healthy 8 percent - above analysts' expectations - with total sales for the four-week period that ended Aug. 3 vaulting 12 percent to $3.34 billion.

Operating earnings, however, are "below plan" for the first eight weeks of the quarter, which ends Aug. 31.

Costco noted in March that high worker's compensation costs - particularly in California - was at the heart of weaker-than-expected results. The company has said that while only one-third of its workforce is in the West Coast state, those employees absorb more than two-thirds of annual workers' compensation costs even though injury rates are in line.

Jennifer Waters is the Chicago bureau chief for CBS.MarketWatch.com.

[Grampa Dave]

The fecal finger of fate from the Kalifornia legislature reaches out and hurts Costco's stock.

Davis and the Kali legislature continue to harm businesses in California and drive them away.

Costco noted in March that high worker's compensation costs - particularly in California - was at the heart of weaker-than-expected results. The company has said that while only one-third of its workforce is in the West Coast state, those employees absorb more than two-thirds of annual workers' compensation costs even though injury rates are in line.

[Grampa Dave]

Will we have any businesses left in California after Davis and his tax and spend socialists/communists in the California legislature act is over?

[Grampa Dave]

After 4+ years of Davis and the out of control, tax and spend maggots in the legislature, it is surprising that any businesses are still here.

[lady lawyer]

Say it isn't so. Costco is my life.

[Eric in the Ozarks]

We looked long and hard at a $3 million investment in Stockton. It was cheaper to do and would reach the same market in Reno NV, so Reno got the project and jobs.

[kylaka]

I don't think "crumble and plummet" accurately depict a 10 cent decline in pershare earnings. Much as I like to lay the blame at Gray Davis' feet, Wal-Mart also has stores in California and is earning twice as much per share as Costco.

[Bloody Sam Roberts]

Get ready for the big liquidation sale. Could be just in time for Christmas.

[retrokitten]

NNNNNNNNOOOOOOOOOOOOOOOO!!!!!!!!!!!!!!!!!!!!!!!!!!

I love Costco!!!

[twigs]

Us too. We LOVE to shop Costco! Normally, we look for locally owned stores, but Costco is an important exception.

[lady lawyer]

Costco is sport shopping. You go there with an open mind, and never know what treasures you'll find.

[gathersnomoss]

We would be more than happy to have Costco relocate to the Commonwealth of Virginia. More of my money that is spent at Costco would stay in the state.

[twigs]

We like to stop in Costco in VA when we visit because we can buy wine there. Here in PA we can't. The state controls it. We love Costco anywhere!

[twigs]

open mind, and never know what treasures you'll find

Don't I know it! I never ask my husband to go pick up the things I need there toward the end of the month when I'm keeping an uneasy eye on the check balance. It's been the agency of his (and therefore our) "lack of balance" more than once!

[Grampa Dave]

This will probably cause some closures of Costco stores in N. California.

The stores with higher Workman's Comp and lower volume will be the first to go.

[Grampa Dave]

Your reply is what has been happening in California for the past two plus years re incoming business. Your reply:

We looked long and hard at a $3 million investment in Stockton. It was cheaper to do and would reach the same market in Reno NV, so Reno got the project and jobs.

[resistance]

I spend a fortune saving money at Costco.

[budwiesest]

The likely solution will be to cut staff to bring costs in line. Speaking of lines, recall the lines most had to endure in Russia for a loaf of bread or a bottle of vodka- hours at a time.

This socialisation of business will result in a higher number of unemployed as well as lower sales as some customers will leave rather than waste time standing in huge lines.

[Grampa Dave]

Try 18%, Investors unloaded 14 percent of Costco's share value in heavy early trading Tuesday after the wholesale club warned that quarterly profits could dive as much as 18 percent.

[Grampa Dave]

We think that some of the stores have cut personnel as you noted as the lines are longer with less clerks at the checkout counters during the regular working hours at one of the Costco's we go to.

[bmwcyle]

Costco should have kept the Price Club name.