Posted on: Friday, December 10, 2004

Higher sales push Costco profits up 21% for 1st quarter

Associated Press

ISSAQUAH, Wash. — Discount retailing giant Costco Wholesale Corp. said yesterday that profits grew 21 percent in its fiscal first quarter, helped by higher sales and more revenue from membership fees.

For the three months ended Nov. 21, the Issaquah company reported earnings of $193.2 million or 40 cents per share, up from $160.2 million or 34 cents per share in the same period last year.

Sales rose 10 percent to $11.34 billion, up from $10.31 billion in the same period a year ago.

Costco's results met the expectations of Wall Street analysts, who had been expecting earnings of 40 cents per share on total revenue, including membership fees, of $11.57 billion.

Shares in the company, which had been trading near a 52-week high of $50.46, slipped 80 cents, or 1.6 percent, to close at $48.10 yesterday on the Nasdaq.

Analyst Todd Slater with Lazard & Co. said he thought the company would have needed to exceed, rather than just meet, expectations to see its stock price rise substantially. He said Costco did slightly better than expected considering that its profits including $6 million in costs related to hurricanes, but that likely wouldn't be enough to give the stock a boost at this point.

"There needs to be a little more spectacular news to move the stock up," he said.

Same-store sales, which look at Costco warehouses that have been open at least a year, rose 7 percent from the same period last year. But the company said this quarter's sales figures were affected by a change in accounting rules that alters the way it reports sales on special coupon promotions. Without that change, comparable net sales would have risen 11 percent, and same-store sales would have risen 8 percent.

The change affects sales and merchandise costs equally, so profits were not affected.

Costco operates 449 warehouses in the United States, Puerto Rico, Canada, United Kingdom, South Korea, Taiwan, Japan and Mexico.