Pandemic shoots up costs for Costco, profit misses estimates

Pandemic shoots up costs for Costco, profit misses estimates

Membership-only retail chain Costco Wholesale Corp beat analysts' estimates for second-quarter revenue on Thursday, as people stuck at home spent more on frozen foods, liquor and electronic products.

FILE PHOTO: A sign is seen outside a Costco Wholesale store in Glenview
FILE PHOTO: A sign is seen outside a Costco Wholesale store in Glenview, Illinois, U.S. May 24, 2016. REUTERS/Jim Young

REUTERS: Costco Wholesale Corp missed analysts' estimates for second-quarter profit on Thursday, as the warehouse club operator spent more on employee benefits who worked through the COVID-19 pandemic and sanitizing its stores.

Millions of dollars in pandemic-related charges have further hurt profit margins of retailers, who have already been investing heavily in their supply chains to cut delivery time as online demand surges due to the health crisis.

Costco offered a premium pay to workers at the onset of the pandemic outbreak and from March raised the minimum wage for its hourly staff to US$16, a dollar over what its competitors Amazon.com Inc and Target Corp pay per hour.

The warehouse retail chain, which brings in only a fraction of sales from its online channels and relies largely on the treasure hunt shopping experience, has been focusing on growing its online sales over the past year. Overall online sales jumped 75.8per cent in the second quarter from a year earlier.

Net income attributable to the company rose to US$951 million, or US$2.14 per share, in the second quarter ended Feb. 14, from US$931 million, or US$2.10 per share, a year earlier. Analysts were expecting a profit of US$2.45 per share.

Total revenue rose to US$44.77 billion from US$39.07, beating analysts' average estimate of US$43.78 billion, according to Refinitiv IBES data.

Shares of Issaquah, Washington-based Costco, which shed about 14per cent this year, slipped 1.6per cent in extended trading.

(Reporting by Mehr Bedi in Bengaluru; Editing by Shinjini Ganguli)

Source: Reuters

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