10-KPeriod: FY2017

COSTCO WHOLESALE CORP /NEW Annual Report, Year Ended Sep 3, 2017

Filed October 18, 2017For Securities:COST

Summary

Costco Wholesale Corporation's 2017 10-K filing highlights a year of consistent growth, with net sales reaching $126.2 billion, an increase of 9% year-over-year. This growth was primarily driven by a 4% increase in comparable sales, the opening of new warehouses (26 net new in 2017), and the benefit of an extra week in the fiscal year. Membership fee revenue also saw a robust 8% increase, signaling strong member loyalty and the positive impact of recent membership fee adjustments in the U.S. and Canada. The company continued its international expansion, with a notable increase in warehouses in Canada and other international markets. While gross margin percentage saw a slight decrease, this was largely attributed to the impact of gasoline prices and changes in sales mix. Importantly, selling, general, and administrative (SG&A) expenses as a percentage of net sales decreased, benefiting from improved terms in the U.S. co-branded credit card arrangement. Net income saw a significant 14% increase to $2.68 billion, or $6.08 per diluted share, reflecting operational efficiencies and a favorable tax benefit. Costco also demonstrated a commitment to returning capital to shareholders through dividends, including a substantial special cash dividend, and ongoing share repurchase programs.

Financial Statements
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Key Highlights

  • 1Net sales grew by 9% to $126.2 billion in fiscal year 2017, driven by comparable sales growth of 4% and the addition of 26 net new warehouses.
  • 2Membership fee revenue increased by 8% to $2.85 billion, bolstered by fee increases in the U.S. and Canada and strong renewal rates (90% in U.S./Canada, 87% worldwide).
  • 3Net income rose 14% to $2.68 billion, resulting in diluted earnings per share of $6.08, up from $5.33 in the prior year.
  • 4The company paid a special cash dividend of $7.00 per share in May 2017 and increased its quarterly dividend to $0.50 per share.
  • 5SG&A expenses as a percentage of net sales decreased by 14 basis points, primarily due to favorable changes in the U.S. co-branded credit card arrangement.
  • 6Costco continued its global expansion, operating 741 warehouses worldwide at the end of fiscal 2017, with plans for further growth in fiscal 2018.
  • 7The company reported strong operational execution, with efforts to manage costs and leverage economies of scale, particularly through its membership model and private-label Kirkland Signature brand.

Frequently Asked Questions

Costco reported strong performance in fiscal year 2017, with net sales increasing by 9% to $126.2 billion and net income growing by 14% to $2.68 billion. This growth was driven by a 4% increase in comparable sales, the opening of new warehouses, and robust membership fee revenue, which increased by 8%.

Costco demonstrated effective expense management. Selling, General, and Administrative (SG&A) expenses as a percentage of net sales decreased by 14 basis points, largely due to beneficial changes in its U.S. co-branded credit card arrangement. While gross margin percentage saw a slight decrease, this was influenced by factors like gasoline prices and sales mix, with underlying merchandise margins showing improvement.

Costco continues to focus on growth through both comparable sales increases and physical expansion. In fiscal 2017, they opened 26 net new warehouses globally and plan to open approximately 24 more in fiscal 2018. International expansion remains a key strategy, with growth anticipated in markets outside the U.S.

Costco is actively returning value to shareholders through dividends and share repurchases. In fiscal 2017, they paid a significant special cash dividend of $7.00 per share and increased their regular quarterly dividend. The company also continued its share repurchase program, buying back approximately 3 million shares during the year.