Costco Sinks on Rare Sales Stumble

Shares slide after the warehouse-club retailer reports soft traffic in August.
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Updated from 9:46 a.m. EDT

SAN FRANCISCO --

Costco's

(COST) - Get Report

recent sales winning streak came to a halt in August, with hot temperatures in California contributing to slower traffic.

The Issaquah, Wash.-based company reported a 2% increase in same-store sales, or sales at stores open at least a year, for the month.

Costco's international same-store sales grew by 8% in August, helped by stronger foreign currencies and healthy sales in Korea and Taiwan. But domestic same-sales jumped by only 1%, with particular weakness in California, where about 29% of Costco's stores are located.

Shares of Costco recently were down $3.21, or 5.2%, to $58.40.

The company said that although the average transaction size at its stores rose 2.5% in August, traffic was down 1%. In California, traffic was down 4.5%, compared with its usual percentages of flat to slightly up.

David Strasser, an analyst at Banc of America Securities, called Costco a stellar performer but added that potential headwinds may be catching up with it.

"The slowdown in California is blamed mostly on the weather, something we believe had an impact, but with the California economy slowing down and the high California exposure of Costco, we believe this needs to be monitored closely," Strasser wrote in his research.

Strasser had projected that the company's August same-store sales would rise 5.5%.

Costco has been a standout among its rivals in the discount chain sector, trouncing giants like

Wal-Mart

(WMT) - Get Report

, which has been struggling with slowing sales in home furnishings and apparel. The last time Costco posted a monthly comp a low as 2% was in January, after reporting a 9% increase the previous month.

Analysts expect the discount sector as a whole to record a 2.4% rise in August same-store sales, according to Thomson Financial.

Excluding Wal-Mart, analysts predict same-store sales will jump 4.8%.

Target

(TGT) - Get Report

is favored to lead the pack, with a 4.9% increase.

Wal-Mart and Target, which will report their August results Thursday, each were trading lower after Costco's stumble. Wal-Mart was down 74 cents, or 1.7%, to $42.56, while Target slipped $1.93, or 3%, to $62.31.