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Costco's 2Q performance misses analysts' estimates

ISSAQUAH, Wash. (AP) -- Costco's fiscal second-quarter net income fell 15 percent, hurt by softer sales of some non-food items, weaker gross margins in its fresh foods business and the impact of weaker foreign currency exchange rates on its international results. The year-ago period was also helped by a tax benefit.

Its latest performance missed Wall Street's view. The stock declined in premarket trading on Wednesday.

Separately, Costco said sales at stores open at least a year rose 2 percent in February. Analysts polled by Thomson Reuters expected a 2.3 percent increase. The figure climbed 3 percent in the U.S., but dipped 1 percent abroad.

Taking out lower gas prices and foreign currency fluctuation, sales at stores open at least a year increased 4 percent. In the U.S. the metric rose 4 percent. It gained 5 percent internationally.

Shares of Costco fell 22 cents to $116.25 before the market open.

For the period ended Feb. 16, the wholesale club operator earned $463 million, or $1.05 per share. That compares with $547 million, or $1.24 per share, a year earlier. The prior year period included a tax benefit of 14 cents per share related to part of a special cash dividend that Costco Wholesale Corp. paid in December 2012 to its 401(k) plan participants.

Analysts, on average, expected earnings of $1.16 per share, according to a FactSet survey.

Merchandise costs and selling, general and administrative expenses climbed during the latest quarter. The provision for income taxes increased to $255 million from $185 million.

Revenue for the Issaquah, Wash., company rose 6 percent to $26.31 billion from $24.87 billion, buoyed by higher sales and an increase in money taken in from membership fees.

Wall Street predicted revenue of $26.72 billion.

Sales at stores open at least a year, a key indicator of a retailer's health, climbed 3 percent for the quarter. In the U.S. the figure rose 4 percent. It was flat overseas.

This metric excludes results from stores recently opened or closed.

Excluding foreign currency fluctuation and lower gas prices, second-quarter sales at stores open at least a year increased 5 percent. The figure rose 5 percent in the U.S. and climbed 7 percent abroad.

Costco currently runs 649 warehouses, including 462 in the U.S. and Puerto Rico, 87 in Canada, 33 in Mexico, 25 in the U.K., 18 in Japan, 10 in Taiwan, nine in Korea and five in Australia. It plans to open up to an additional 14 new warehouses before the end of its fiscal year on Aug. 31.

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