Hope For Retail: Costco (NASDAQ:COST) Beats The Street

Costco (NASDAQ:COST) announced earnings that beat Wall St. expectations.

Net sales for the fiscal 2009 fourth quarter  ended August 30, 2009 were $21.89 billion, a drop from $22.63 billion in the same period a year ago. Net income for the fourth quarter of fiscal year 2009 was $374 million, or $.85 per share, compared to $398 million, or $.90 per share, in the same quarter last year. Analysts expected EPS of $.77.

Same-store sales worldwide dropped 5% during the quarter.

The news may appear to be relatively good for the retail industry, but that would be too broad an interpretation. Costco is a big box retailer, albeit one that caters to the high-end of the market. The company is known for offering value prices to customers who are willing to buy items in volume. There are not many firms in the industry that fall into that category.

The challenge for retailers, especially niche firms like Abercrombie & Fitch (NYSE:ANF) and general merchandise stores like Macy’s (NYSE:M), is that they are not widely considered places to go for low-cost items. Retail industry executives expect sales to drop again this holiday season after plunging in 2008.

Selling value may work for retailers for the balance of the year. That won’t help the large part of the industry that just sells.

Douglas A. McIntyre