Wow. I had thought the wholesale clubs and discounters were weathering the economic storm rather well. So Costco's lowered outlook comes as a shock.
“Factors negatively affecting our fourth quarter earnings outlook arise largely from inflation, particularly as to energy costs,” the chief financial officer, Richard Galanti, said in a statement.
The outlook reflects weakness in the company's gasoline operations and slightly lower-than-planned merchandise profits as the company holds back on price increases to drive sales.
Mr. Galanti also said a greater-than-anticipated LIFO charge, which refers to the last-in-first-out method that assumes the most recent inventory purchases or goods manufactured are sold first. During times of rising prices, that results in a charge that eliminates inflationary profits from net income.