Costco profit up better-than-expected 19%
NEW YORK (MarketWatch) --
The company (COST) , which attracted shoppers by postponing price increases on such items as pizza amid gas and food cost inflation the past two years, also said it may see some benefit to margin as inflationary cost pressure eases for things including olive oil, cheese and butter.
"The core business trends at Costco continues to be strong," said David Strasser of Janney Capital Markets. "Consumers understand the value of a Costco membership. This strategy to invest in pricing and highlight value is at the core of (Costco), and has successfully driven higher traffic, sales and market share over the years."
While the company expects to continue to drive traffic through its offerings of cheaper fresh food in bulk, gas and specialty foods like high-end nuts and organic milk, Costco said on Thursday it's not oblivious to the broader economic pressures.
U.S. retailers from
"Notwithstanding our relative sales strength and member sign-ups, we still think it's pretty fragile out there," said Chief Financial Officer Richard Galanti on a conference call. "We're not seeing any big risk of a big shoe dropping here but we're also not seeing anything that's driving it in a big way that's sustainable right now."
Still, he said the company will remain "aggressive on discretionary items" including patio furniture sets that consumers who come in for fresh food and gas may buy.
In response to
Wal-Mart, which also owns Sam's Club, has lowered product prices, especially in food and consumables, to drive sales and traffic. See Wal-Mart rallies as U.S. gains traction.
Costco's profit in the quarter ended May 6 rose to $386 million, or 88 cents a share, from $324 million, or 73 cents, a year earlier.
Sales climbed 8.2% to $21.85 billion. Membership fees rose 9.2% to $475 million after the company in November increased its membership rate by $5 to $55 for regular members and $110 from $100 for executive members. .
Total revenue also rose 8.2% to $22.3 billion.
Analysts surveyed by FactSet were looking for profit of 87 cents a share on $22.1 billion of revenue. The upside was driven by a lower tax rate and higher interest income.
Costco (COST) shares rose 1.4% to $84.48.
Comparable sales rose 5%, with the same amount of increase both in the U.S. and overseas, the Issaquah, Wash.-based membership warehouse club chain said. That missed the 7.3% increase analysts surveyed by Thomson Reuters were looking for.
Excluding gasoline-price inflation and a negative effect of foreign-currency translations, same-store sales also rose 5%, including a 4% increase in the U.S. and an 8% gain internationally.
Costco operates 602 warehouses, including 435 in the U.S. and Puerto Rico and the rest in countries from Canada and Mexico to Japan and Taiwan.