The Wrong Time to Buy in Bulk

Last week Costco (COST) reported its fiscal first quarter (ended Nov. 20), and the results disappointed some investors, as two large one-time items totaling $0.07 hit its earnings per share. The stock declined sharply, and some thought it was a buying opportunity -- but I'm not among them.

Yes, same-store sales were strong: Excluding gasoline and foreign currency, comps were up a total of 7%, including 6% in the U.S. and 11% internationally. However, I was disturbed by the weak gross margins, which came in at 10.62% -- 35 basis points lower than last year. While 35 basis points is not a big deal, other warehouse retailers have also experienced gross-margin declines. Wal-Mart (WMT) subsidiary Sam's Club, for instance, saw its gross margins fall 28 basis points. It was the first time in 12 quarters that this number slipped....156 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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