What drove the increase in net sales?

The 10.0% increase in net sales was driven by a 7.0% rise in comparable warehouse sales and the opening of 15 new warehouses since the end of the prior fiscal year's first quarter. Gasoline sales also contributed approximately 128 basis points to the sales increase, largely due to higher prices.

How did Costco manage its expenses?

Costco improved its gross margin by 8 basis points due to stronger performance in merchandise departments and reduced selling, general, and administrative (SG&A) expenses by 3 basis points as a percentage of net sales. This SG&A improvement was primarily due to changes in healthcare plans and increased expense leverage in warehouse operations.

What is the company's outlook for expansion?

Costco plans to spend approximately $800 million to $900 million in fiscal year 2005 on real estate, construction, remodeling, and equipment for warehouse clubs in the U.S. and Canada. Additionally, $100 million to $150 million is allocated for international expansion. The company expects to open an additional 19 to 21 new warehouse clubs during the remainder of fiscal year 2005.

What impact did EITF 03-10 have on the financial results?

The adoption of EITF Issue No. 03-10, concerning the accounting for certain vendor consideration, reduced net sales and merchandise costs by an equal amount, impacting gross margin percentage positively by 8 basis points and SG&A as a percentage of net sales negatively by 8 basis points for the first quarter of fiscal 2005. If it had been applied in the prior year's comparable quarter, the net sales increase would have been 10.8% and comparable sales growth approximately 8.0%.

COST 10-Q Quarterly Report Q1 FY2005 — Revenue, Net Income, EPS

Summary

Costco Wholesale Corporation reported strong performance for the first quarter of fiscal year 2005, concluding November 21, 2004. Net sales saw a robust 10.0% increase year-over-year, reaching $11,339,944, driven by a solid 7.0% comparable store sales growth and the addition of 15 new warehouses. Membership fees also grew by 12.5%, indicating successful member acquisition and retention, particularly from the Executive Membership Program. Profitability improved with net income rising 20.6% to $193,153, or $0.40 per diluted share. This was supported by an 8 basis point improvement in gross margin, attributed to stronger performance in merchandise departments, and a 3 basis point reduction in selling, general, and administrative (SG&A) expenses as a percentage of net sales, largely due to favorable changes in healthcare plans. The company also announced a quarterly cash dividend of $0.10 per share, underscoring its commitment to returning value to shareholders.

Key Highlights

1Net sales increased by 10.0% to $11,339,944 in Q1 FY2005 compared to Q1 FY2004.
2Comparable store sales grew by 7.0%, indicating strong performance in existing locations.
3Net income increased by 20.6% to $193,153, or $0.40 per diluted share.
4Membership fees rose 12.5%, highlighting member growth and strong renewal rates.
5Gross margin as a percentage of net sales improved by 8 basis points to 10.65%.
6Selling, general, and administrative expenses as a percentage of net sales decreased by 3 basis points to 9.98%.
7The company declared a quarterly cash dividend of $0.10 per share.

COSTCO WHOLESALE CORP /NEW Quarterly Report for Q1 Ended Nov 21, 2004

Summary

Key Highlights

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