Summary
Costco Wholesale Corporation reported its first quarter results for fiscal year 2001, ending November 26, 2000. While net income remained relatively flat at $129.5 million compared to $129.3 million in the prior year's first quarter, this was achieved on a 10% increase in net sales, reaching $7.5 billion. This sales growth was driven by the opening of 26 net new warehouses since the prior year and a 5% increase in comparable warehouse sales. Membership fees also saw a significant 16% increase, partly due to a modest average annual fee increase. The company is aggressively pursuing expansion, with plans to invest significantly in new warehouses in the US, Canada, and internationally, including the UK, Asia, and Mexico. This expansion, alongside increased wages, new credit card programs, and higher utility costs, led to a rise in selling, general, and administrative expenses as a percentage of sales. Despite these increased operating expenses and higher preopening costs associated with expansion, Costco demonstrated strong gross margin improvement, driven by increased sales of higher-margin private label items and better international performance.
Key Highlights
- 1Net income for Q1 FY2001 was $129.5 million, a slight increase from $129.3 million in Q1 FY2000, with earnings per diluted share remaining stable at $0.28.
- 2Net sales increased by 10% to $7.5 billion in Q1 FY2001, driven by the addition of 26 net new warehouses and a 5% increase in comparable warehouse sales.
- 3Membership fees and other revenue grew by 16% to $138.3 million, benefiting from new memberships and an increase in the average annual membership fee.
- 4Gross margin improved to 10.47% of net sales, up from 10.32% in the prior year, attributed to higher sales of private label merchandise and improved international operations.
- 5Selling, general, and administrative expenses as a percentage of net sales increased to 9.22% from 8.74%, due to higher wages, new warehouse openings, credit card program rollout, and utility costs.
- 6The company plans substantial capital expenditures for fiscal year 2001, targeting $900 million to $1.1 billion for US and Canada expansion and $150 million to $200 million for international growth.
- 7Costco maintained strong liquidity with no outstanding commercial paper or bank credit facility borrowings as of November 26, 2000, and has significant credit facilities available.