Why Costco Stock Fell Today

What happened

Shares of Costco (NASDAQ: COST) have fallen today, down by 5% as of 2:40 p.m. EDT, after the company reported fiscal fourth-quarter earnings results. Investors were also rattled by a potential accounting issue that the company disclosed.

So what

Revenue in the fiscal fourth quarter increased 5% to $44.4 billion, which translated into net income of $1.04 billion, or $2.36 per share. Those top- and bottom-line results were mostly in line with analyst estimates, which called for $44.4 billion in sales and $2.34 per share in profit. As is often the case, membership fees comprised the bulk of operating income -- $997 million out of $1.4 billion, to be precise.

However, the wholesale warehouse retailer disclosed a "material weakness in internal control" that spooked investors.

Now what

The problem stems from the company's IT controls around user access related to IT systems that support Costco's financial reporting. "The access issues relate to the extent of privileges afforded users authorized to access company systems," Costco stated in its release. The company was quick to point out that it has already started to rectify the problem and that it has not identified any misstatements in its financial statements.

On the earnings call, CFO Richard Galanti provided a little bit more detail:

Costco expects to complete its remediation process by the end of fiscal 2019.

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Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool recommends Costco Wholesale. The Motley Fool has a disclosure policy.