Before the bell, the stock had taken off 2.9% to $113.09.
In the three months to mid-February, the membership-only retailer posted net income of $463 million compared to the year-ago quarter's $547 million, even as revenue jumped 5.8% to $26.31 billion.
Earnings of $1.05 a share missed consensus by 12 cents, according to analysts surveyed by Thomson Reuters.
Though last year's profits were boosted by a $62 million tax benefit, the company said the results were not ideal.
"The year-over-year comparison was unfavorable," said chief financial officer Richard Galanti. "The first four-week period of the quarter represented the majority of earnings underperformance in the quarter."
Costco's second quarter began on Nov. 25, a period when retailers were offering steep discounts amid an aggressively promotional environment, a factor of worse-than-expected winter storms and six less shopping days between Thanksgiving and Christmas.
The Issaquah, Washington-based company said lower earnings were attributable to weaker sales and gross margins in its non-foods categories, weaker margins in its fresh food segment, and lower international profits due to unfavorable forex rates. Overall, gross margins were clipped to 11.26% from 12.48% in the year-ago quarter.
Comparable sales increased 3% over the quarter, with 4% growth in the U.S. and remained unchanged internationally.
Margin pressure is being felt across the industry. The world's largest retailer, Wal-Mart (WMT), recently reported a 21% drop in net profits over its January-ended quarter, blaming wintery weather and a reduction in the government's food-stamp program for diminished earnings.
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