10-QPeriod: Q3 FY2000

COSTCO WHOLESALE CORP /NEW Quarterly Report for Q3 Ended May 7, 2000

Filed June 14, 2000For Securities:COST

Summary

Costco Wholesale Corporation (COST) reported strong performance for the third quarter and the first 36 weeks of fiscal year 2000. Net income for the third quarter rose 14% to $120.3 million, translating to $0.26 per diluted share. This growth was driven by a 14% increase in net sales, reaching $6.77 billion, fueled by the opening of 17 net new warehouses and a 10% increase in comparable warehouse sales. Gross margin saw a slight improvement to 10.11% of net sales, benefiting from higher sales of ancillary businesses and private label products. For the first 36 weeks of fiscal 2000, net income was $431.3 million, or $0.92 per diluted share, a significant increase from the prior year which included a large non-cash charge related to accounting for membership fees. Net sales for this period grew 16% to $21.2 billion, with comparable warehouse sales up 12%. The company continues its aggressive expansion strategy, planning significant capital expenditures for new warehouses in the U.S., Canada, and internationally. Costco also recently acquired full ownership of its UK subsidiary.

Key Highlights

  • 1Third quarter net income increased 14% to $120.3 million, or $0.26 per diluted share.
  • 2Net sales for the third quarter grew 14% to $6.77 billion, driven by new warehouse openings and a 10% rise in comparable sales.
  • 3For the first 36 weeks of fiscal 2000, net sales increased 16% to $21.2 billion, with comparable sales up 12%.
  • 4Gross margin improved to 10.11% in Q3 and 10.42% year-to-date, attributed to ancillary businesses and private label products.
  • 5The company acquired full ownership of its UK subsidiary (Costco Wholesale UK Limited) on May 26, 2000.
  • 6Costco plans significant capital expenditures of $800-$950 million for U.S./Canada expansion and $100-$150 million for international expansion in fiscal 2000.
  • 7The company executed a 2-for-1 stock split effective January 14, 2000; all per share data reflects this split.

Frequently Asked Questions

Costco's sales growth in the third quarter was primarily driven by the opening of 17 net new warehouses and a 10% increase in comparable warehouse sales. New marketing and merchandising efforts, including the rollout of ancillary businesses, also contributed.

For the third quarter of fiscal 2000, net income increased by 14% to $120.3 million. Year-to-date, net income showed a substantial increase to $431.3 million, partly due to the prior year's period including a significant non-cash charge related to a change in accounting for membership fees.

Costco intends to spend approximately $800 million to $950 million in fiscal 2000 for U.S. and Canada expansion (new warehouses, remodeling, equipment) and an estimated $100 million to $150 million for international expansion. This includes plans to open 20-25 new U.S./Canada warehouses and additional units in the United Kingdom and Taiwan.

Yes, on May 26, 2000, Costco acquired the remaining 20% equity interest in its UK subsidiary, Costco Wholesale UK Limited, bringing its ownership to 80%. This acquisition was funded by cash on hand.