As the recession prompts shoppers to abandon traditional department stores and pricey boutiques in favor of wholesale clubs and discount retailers, a major player still finds its stock one notch short of a "buy" from Ratings.

Costco ( COST) gets an overall grade of C-plus from Ratings model. Wal-Mart ( WMT), BJ's Wholesale Club ( BJ) and PriceSmart ( PSMT), meanwhile, are recommended as "buys" with overall grades in the "B" range. Ratings model determined Costco's "hold" status by quantitatively weighing the firm's valuation metrics, current financial situation and analysts' consensus expectations of future growth. The firm's "risk grade" of a cautious D-plus pulled its overall grade into the "C" range, which equates with a "hold" recommendation.

Costco won't be able to lure as many miserly consumers as other companies. Financial analysts expect Costco's net earnings per share to fall 8% this fiscal year, which ends in August, before resuming growth in 2010, with an advance of 11.7%. The dip in profitability results in a price-to-earnings ratio for Costco of close of 16, based on the current year's estimated net. The firm's shares, therefore, appear to be less appealing than its competitors, whose P/E ratios are in the 12-13 range.

The discounter's stock rose steadily from the high $20s in 2002 and peaked in the mid-$70s in July 2008. From there, it spiraled downward to its current range in the low $40s.

Yesterday, Costco announced that same-store sales slipped 3% in February from a year earlier. Because of a strong recovery in the value of the greenback relative to foreign currencies, the dollar value of Costco's international same-store sales tumbled 15%. Without the negative impact of lower gasoline prices and foreign-exchange adjustments, same-store sales would have climbed 5%, with an advance of 6% in international locations.

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