Costco Pays Retail for Energy

Citing rising energy prices in California, where it has one-fourth of its stores, Costco Wholesale Corp. (Issaquah, Wash.) announced a 13 percent drop in profits for its third quarter ending May 13, 2001. It was the second consecutive quarter in which profits fell after more than six years of earnings increases, though same-store sales rose 5 percent.

The retailer also increased spending on new stores by 90 percent, spending $12.8 million to open nine new warehouse stores. It plans to open 33 new stores by the end of the year.

“Energy prices in California will certainly impact Costco more than another national retailer,” an analyst said. “It costs more to operate in California, and they have an awful lot of operations [90 stores] in California.

The largest wholesale club operator in the U.S. (even ahead of Wal-Mart's Sam's Club), Costco has more than 300 membership warehouse stores serving more than 30 million members in the U.S., Canada, Japan, Mexico, South Korea, Taiwan and the U.K.