Pandemic shoots up costs for Costco, profit misses estimates

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FILE PHOTO: A sign is seen outside a Costco Wholesale store in Glenview

(Reuters) - Costco Wholesale Corp missed analysts' estimates for second-quarter profit on Thursday, as the warehouse club operator spent more on employee benefits who worked through the COVID-19 pandemic and sanitizing its stores.

Millions of dollars in pandemic-related charges have further hurt profit margins of retailers, who have already been investing heavily in their supply chains to cut delivery time as online demand surges due to the health crisis.

Costco offered a premium pay to workers at the onset of the pandemic outbreak and from March raised the minimum wage for its hourly staff to $16, a dollar over what its competitors Inc and Target Corp pay per hour.

The warehouse retail chain, which brings in only a fraction of sales from its online channels and relies largely on the treasure hunt shopping experience, has been focusing on growing its online sales over the past year. Overall online sales jumped 75.8% in the second quarter from a year earlier.

Net income attributable to the company rose to $951 million, or $2.14 per share, in the second quarter ended Feb. 14, from $931 million, or $2.10 per share, a year earlier. Analysts were expecting a profit of $2.45 per share.

Total revenue rose to $44.77 billion from $39.07, beating analysts' average estimate of $43.78 billion, according to Refinitiv IBES data.

Shares of Issaquah, Washington-based Costco, which shed about 14% this year, slipped 1.6% in extended trading.

(Reporting by Mehr Bedi in Bengaluru; Editing by Shinjini Ganguli)