Costco shares slip after reporting 'material weakness' and missing Street's fiscal 4Q revenue forecast

Shares of Costco Wholesale Corporation (NASDAQ:COST) are still slipping in Friday’s pre-market session after the warehouse retailer fell short of Wall Street’s revenue forecast for its fiscal fourth quarter and warned that it expects to report a “material weakness” in its internal control over its financial reporting.

The retailer said the weakness “relates to general information technology controls in the areas of user access and program change-management over certain information technology systems that support the company’s financial reporting processes.”

Further details will be revealed in Costco’s upcoming annual report and the company expects to file its 10K regulatory filing on time.

“As of the date of this release, there have been no misstatements identified in the financial statements as a result of these deficiencies,” Costco said in its release.

In response, Costco shares dipped 2.5% to $255.90 before Friday’s opening bell.

For the three months ended September 2, the retailer reported net income of $1.04 billion, or $2.36 per share, compared to $919 million, or $2.08 per share in the year-ago quarter. Its net sales, meanwhile, jumped to $43.4 billion, up from $41.36 billion in the year ago quarter.

The results fell short of the sales estimates of Wall Street’s analysts who had penciled in earnings per share of $2.36 on sales of $44.2 billion.

Costco’s gross margin also dropped 0.35% to 10.92% in the quarter due to an increase in gas prices as well as investments.

For the full year, Costco posted a profit of $3.13 billion, or $7.09 per share, on revenue of $141.58 billion.

Story by ProactiveInvestors