Deutsche Bank: Costco's Q1 Print 'Below Buy-Side Expectations'

Paul Trussell of Deutsche Bank commented in a note on Wednesday after Costco Wholesale Corporation's COST first quarter that the company's print was below buy-side expectations.

“Costco posted a six basis points decline in core business/merchandising gross product margin or down 13 basis points ex-gas,” Trussel wrote. “This marks the first ex-gas margin contraction since 2Q14, and the largest since 3Q12.”

Trussell notes that Costco's negative performance was driven by hardlines as well as fresh food, which was only partly offset by food and sundries and softlines. The analyst adds that the company's Ancillary business was a key contributor to 22 basis points gross product margin expansion.

Due to margin assumptions based on foreign exchange headwinds and gas prices, the analyst is now lowering his fiscal 2015 EPS estimate to $5.25 from a previous $5.40. However, the analyst's $147 price target remains in place.