COST EPS Q3 FY 2011 - Costco Trouble Passing Prices Through

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Costco

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COST EPS Q3 FY 2011

Costco (Nasdaq: COST) shares were down 1% in Wednesday trading, after the company reported its third quarter profit up 5.9%. Revenue gained 16%, benefiting from U.S., Canadian and Mexican growth. COST’s EPS of $0.73 though, fell short of the consensus view for $0.77, based on Factset data. Costco’s revenue growth benefited from higher gasoline and food prices, but its gross margin was pressured. It appears many companies are having trouble passing price increases completely through. When a discounter's cost of goods sold is pressured, and it competes on price, its margins are getting squeezed. So while a tough economy and rising prices send people to the discounters, driving up their volumes, it also contracts their variable cost margins.



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