Warehouse club Costco Wholesale posted a 4.9% drop in third quarter earnings today (31 May) due to a charge related to an increased return reserve.

Net income dropped to US$224m, down from $235.6m. Net sales rose to $14.34bn, up from $13.01bn. . Sales were reduced by $228.2m on an increased reserve for customer returns.

Before-tax expenses of $48.1m primarily reflected a narrowed gross margin on future returns. Excluding the new reserve, EPS were $0.56 versus $0.49.

Costco is the US's largest warehouse club operator, followed by Wal-Mart's Sam's Club and BJ's Wholesale Club.