Costco Wholesale Corp. (COST), the largest U.S. warehouse club, on Thursday posted a 21 percent rise in quarterly profit but its shares fell after it failed to beat expectations.

The result disappointed the market which is used to Costco producing bigger-than-expected numbers and came after No. 1 retailer Wal-Mart Stores Inc. (WMT) last week warned of slower-than-usual sales growth in December.

"The company had been beating (earnings per share) expectations in previous quarters, so this is not as strong as previous quarters," said analyst Mark Miller of William Blair & Co. LLC.

Costco's share price was down 1.16 percent, or 58 cents, at $48.33 on Nasdaq.

For the first fiscal quarter ended on Nov. 21, net income increased to $193.2 million, or 40 cents a share, from $160.2 million, or 34 cents a share, a year earlier, with lower health-care costs and higher gasoline sales.

Analysts had on average expected profit of 41 cents per share, according to Reuters Estimates, but the company said the result was at the top end of its guidance.

Costco Chief Financial Officer Richard Galanti said the hurricanes in the U.S. Southeast wiped $6.5 million, or 1 cent a share, off earnings in the first quarter.

A slightly lower tax rate of 37 percent added about 0.3 cent to earnings per share but the tax rate for fiscal 2005 overall was expected to be about 37.75 percent.

The Prudential Equity Group (search) said the result could disappoint some investors and it lowered its forecast for 2005 earnings to $2.12 per share from $2.13 and its 2006 forecast to $2.35 per share from $2.36.

Galanti said the company, which plans to open between 23 to 25 new stores in fiscal 2005, was "comfortable" with average market forecasts for earnings of 54 cents per share in the second quarter and $2.11 in fiscal 2005 ending in August.

"We are pleased with the result so far this year," Galanti told a conference call, adding that he was hopeful that the company would exceed these forecasts.

He said Costco expected sales at its stores open at least a year -- a key retail gauge known as same-store sales -- to rise about 6 percent in the second quarter.

Costco said first-quarter sales increased 10 percent to $11.34 billion in the first quarter. Sales at warehouses open at least year rose 7 percent.

The retailer, which competes with Wal-Mart's Sams Club (search) and BJ's Wholesale Club Inc. (BJ), said a Feb. 16 accounting charge hurt its vendor coupon and rebate programs, trimming total and same-store sales growth by 1 percentage point.

Growth in membership fees outpaced sales growth and it had a strong membership renewal rate of 86 percent.

Costco, based in Issaquah, Wash., operates about 449 warehouses in the United States, Puerto Rico, Canada, Britain, Korea, Taiwan, Japan and Mexico.