Dive Brief:

• Costco Wholesale Corp. on Wednesday reported a 2% fiscal Q4 sales rise to $35.7 billion, up from $35 billion a year earlier, but missed the $37.2 billion expected by analysts. The wholesale chain's 52-week fiscal year ended August 28 saw net sales of $116.1 billion, a 2% increase from 2015’s fiscal year $113.7 billion.

• Costco's August same-store sales were flat, missing the Retail Metrics consensus estimate for a 1.3% increase. Full results for the quarter and year will be released later this month.

• Costco saw a 2.33% increase in store traffic in August, while transaction values were down about 2%, mostly due to gas price deflation, according to Retail Metrics’ report. Its best-performing categories were apparel and other soft goods and fresh foods, and there were strong sales in jewelry and home furnishings. Among hard goods, tires, health and beauty sales were strongest. Food price decreases of 1% were a factor in muted sales, according to Costco's post-earnings conference call.

Dive Insight:

Costco is yet another retailer that is experiencing disappointing sales, though its traffic uptick is encouraging.

Falling gas prices, unusual for the summertime months, hit Costco's bottom line especially hard, the company said in a telephone conference message pre-recorded by Jeff Elliott, the company’s assistant vice president of financial planning and investor relations. The retailer also has been grappling with a credit-card switch debacle that has hurt its otherwise stellar reputation for customer service. The new issuer, Citi Visa, conducted a shaky rollout that had many customers waiting for their cards or unable to activate them, and recently sent error-riddled messages to some Costco members that falsely indicated their accounts had been closed. 

The switch was meant to be a boon for both Costco and its customers, with lower fees and better benefits than the club’s previous American Express card. But none of that was mentioned as a factor in the disappointing fiscal Q4 results, with broader retail challenges — food and gas deflation and e-commerce competition, to name two — looming larger.

Costco has enjoyed deep loyalty from members, who pay $55 each year. Renewal rates are high, as members keep coming back for the retailer's attractive assortment and merchandising and its helpful store associates. That should help the retailer weather its current woes; it will have to, considering that the company has largely eschewed e-commerce, a strategy to boost fuel sales and impulse buys.

Costco shares fell 2.2% to $158.50 in pre-market trading, according to the Wall Street Journal.