News Column

Costco Celebrates Better-than-Expected 4Q Profit

Oct. 12, 2012

Melissa Allison


Despite an economy that remains shaky, Costco Wholesale (NASDAQ:COST), keeps showing off some of the best numbers in retail. The warehouse chain, in its quarterly financial report Wednesday, said fourth-quarter profit rose 27 percent to $609 million on a 14 percent rise in revenue to $32.2 billion.

The profit, which came to $1.39 a share, beat Wall Street's expectations by 8 to 10 cents. The revenue included net sales of $31.5 billion (also up 14 percent) and membership fees of $694 million (up 18 percent).

Investors celebrated, sending the stock up 2 percent Wednesday to $101.56 a share.

"They're definitely on a roll," McAdams Wright Ragen analyst Dan Geiman said of the Issaquah-based chain.

But Costco was helped by having a fourth quarter, ended Sept. 2, that was a week longer than the same quarter last year and by a $5 to $10 increase in membership fees last year, he said. "They had the wind at their back in some regards."

Even beyond those items, Geiman said the company's earnings were strong and traffic into its stores remained as robust as it has been throughout the past several years of a sluggish economy.

"Even when some other retailers are getting pretty aggressive in terms of pricing, Costco is still putting up good numbers and still attracting more and more traffic," he said.

Two of Costco's most popular categories remain gasoline and fresh foods, said Chief Financial Officer Richard Galanti.

Costco ended its fiscal year with 608 warehouses, 439 of them in the United States and Puerto Rico. It plans to open 14 new locations before the end of the calendar year.

For the year, it had a profit of $1.71 billion, up 17 percent from the previous year. Revenue rose 11 percent to $99.1 billion, including $2.1 billion in membership fees.

Galanti said the increase in membership fees will translate into roughly $160?million more in revenue each year.

Costco also paid off about $900 million in debt last March, which will save it about $46 million a year in interest payments. And this summer it bought the other half of its profitable Mexico operation using cash that was earning very little interest income, which also boosts earnings.

Source: (c) 2012 The Seattle Times. Distributed by MCT Information Services

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