A revival of consumer cost concerns did not boost results enough for the biggest U.S. warehouse clubs, as margin constraints weighed on Costco Wholesale Corp , while BJ's Wholesale Club Inc faced pricing pressure from rival supermarket chains.

Shares of Costco fell 0.8 percent, while BJ's dropped 4.4 percent. Meanwhile, close-out retailer Big Lots Inc , which specializes in sales of excess inventory, beat estimates and made a stronger than expected earnings forecast, sending its shares up 2 percent.

Costco, the No. 1 U.S. warehouse club operator, sought to win market share during the recession by cutting prices and delaying price increases.

While that strategy helped it retain customers, the company has not improved its margins as quickly as Wall Street had hoped, said Robert W. Baird & Co analyst Peter Benedict.

Costco's gross margins improved by 26 basis points to 10.7 percent, while Benedict had expected a rise of 37 basis points.

It's a very low-margin business, so a few basis points here and there can have an outsized effect on results, he said.

Meanwhile, BJ's said it faced stiff pricing competition in perishable foods. The No. 3 U.S. warehouse club operator has focused on taking business from grocery stores during the downturn as consumers look to save money on food.

But rivals are being aggressive in touting low prices to retain customers and are feeling the consequences as well. Supermarket operator Safeway Inc forecast 2010 profit that could fall short of analysts' estimates after lowering prices.

On its conference call, BJ's Wholesale also said it continued to be significantly impacted by deflationary pressures, especially in food.

While demand for discretionary merchandise is creeping along, Chief Executive Officer Laura Sen said, she has not seen any major turnaround in that area.

BJ's February sales at stores open at least a year rose 7.5 percent, while at Costco, same-store sales jumped 9 percent. Figures at both retailers, which were higher than Wall Street had expected, were helped by strong gasoline sales.

A shift in the timing of the Super Bowl from January last year to February this year helped boost sales, the retailers said, although severe winter storms offset some of those gains.

The snowstorms are expected to be a major factor when major retail chains, from Target Corp to Kohl's Corp , report monthly sales on Thursday.

EARNINGS RISE AT COSTCO, BJ'S WHOLESALE

Warehouse clubs charge customers an annual fee to shop in their stores and get discounts on items ranging from cartons of fresh fruit to flat-screen televisions.

Costco, Wal-Mart Stores Inc's Sam's Club and BJ's have gained customers seeking low prices on necessities like groceries or toiletries in the economic malaise. But falling prices for food and electronics have pressured the clubs' results.

Excluding a charge for employee benefits, Costco earned 70 cents per share for its second quarter ended February 14. Analysts on average were expecting 72 cents, according to Thomson Reuters I/B/E/S.

Quarterly sales rose 11 percent to $18.36 billion, excluding membership fees, which rose 9 percent to $386 million. Same-store sales increased 9 percent.

BJ's said net profit rose to $55.1 million, or $1.01 a share, for the fourth quarter ended January 30 from $52.7 million, or 91 cents a share, a year earlier.

Excluding one-time items, it earned 95 cents a share, missing analysts' average estimate by a penny.

Quarterly sales rose 9.4 percent to $2.74 billion, while same-store sales rose 4.6 percent, including fuel.

For the first quarter, BJ's forecast earnings per share of 40 cents to 45 cents. Analysts on average have expected 43 cents.

BIG LOTS BEATS; OPTIMISTIC ABOUT Q1

Big Lots' profit rose to $105.4 million, or $1.27 per share, for the fourth quarter ended January 30 from $78.8 million, or 96 cents a share, a year before. It also increased the size of its share repurchase program to $400 million.

Excluding one-time items, it earned $1.31 a share, beating analysts' average estimate of $1.28.

Big Lots said customers responded well to its reward points program and February sales benefited from a special event and a strong Presidents Day holiday.

For the first quarter, the company expects earnings of 60 to 65 cents a share from continuing operations. Analysts had been looking for 53 cents.

Big Lots shares rose 2.0 percent to $34.63 in afternoon trading. BJ's fell 4.4 percent to $34.87, while Costco was down 0.8 percent at $60.87.

(Reporting by Nicole Maestri and Dhanya Skariachan; Additional reporting by Nivedita Bhattacharjee; Editing by Michele Gershberg and Gerald E. McCormick)

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