How did Costco's sales performance compare to the prior year?

Costco reported a strong increase in net sales for the second quarter of fiscal 2008, up 12.2% to $16.62 billion compared to $14.80 billion in the prior year's second quarter. This growth was driven by a 7% increase in comparable warehouse sales and the addition of new warehouses. Excluding the impact of a sales return reserve adjustment in the prior year, net sales increased by 10.6%.

What was the profitability trend for Costco during this period?

Profitability showed significant improvement. Net income for the second quarter rose by 31.4% to $327.9 million, with diluted earnings per share increasing to $0.74 from $0.54 in the same period last year. This improvement was supported by an increase in gross margin percentage and a decrease in SG&A expenses as a percentage of net sales.

What is Costco's outlook for expansion and capital expenditures?

Costco plans to continue its expansion strategy, intending to spend approximately $1.6 billion to $1.7 billion in fiscal 2008 on new and remodeled warehouses and related operations. This investment will be funded through operating cash flows and existing liquid assets. The company opened seven new warehouses in the second quarter and plans to open an additional 18 to 20 in the remainder of the fiscal year.

Are there any significant legal proceedings or risks that investors should be aware of?

Costco is involved in several legal proceedings, primarily class-action lawsuits related to wage and hour claims (overtime pay, uncompensated working time), alleged gender discrimination in promotions, and product labeling (organic milk). The company also faces litigation concerning gasoline temperature adjustments and credit card receipt printing. While Costco does not believe these proceedings, individually or in aggregate, will have a material adverse effect, unfavorable outcomes could result in charges that might be material to an individual fiscal quarter. The company is also subject to ongoing inquiries by governmental agencies regarding stock option grants and environmental regulations.

COST 10-Q Quarterly Report Q2 FY2008 — Revenue, Net Income, EPS

Summary

Costco Wholesale Corporation (COST) reported strong financial results for the second quarter and first half of fiscal year 2008, ending February 17, 2008. The company demonstrated robust revenue growth, with net sales increasing by 12.2% year-over-year for the quarter, driven by comparable store sales growth of 7% and contributions from new warehouse openings. Membership fees also saw a healthy 11.6% increase, indicating strong member loyalty and growth. Profitability improved significantly, with net income rising 31.4% for the quarter to $327.9 million, or $0.74 per diluted share. This growth was achieved despite facing some unusual items in the prior year's comparable period that impacted year-over-year comparisons. The company also managed its expenses effectively, with selling, general, and administrative expenses as a percentage of net sales decreasing, and gross margin as a percentage of net sales improving. Costco continued its expansion efforts, opening new warehouses and maintaining its commitment to returning capital to shareholders through dividends and share repurchases.

Key Highlights

1Net sales for the second quarter of fiscal 2008 increased by 12.2% to $16.62 billion, driven by a 7% increase in comparable warehouse sales and contributions from new store openings.
2Membership fees grew by 11.6% to $342.9 million, reflecting continued member growth and the impact of a prior membership fee increase.
3Net income increased by 31.4% to $327.9 million for the quarter, with diluted earnings per share rising to $0.74 from $0.54 in the prior year.
4Gross margin as a percentage of net sales improved to 10.73% from 10.49% in the prior year's second quarter, excluding the impact of unusual items.
5Selling, general, and administrative (SG&A) expenses as a percentage of net sales decreased to 9.72% from 10.05% in the prior year's second quarter.
6The company repurchased approximately 2.0 million shares of its common stock for $129.3 million during the quarter as part of its ongoing stock repurchase program.
7Costco plans to spend approximately $1.6 billion to $1.7 billion on new and remodeled warehouses and related operations during fiscal 2008.

COSTCO WHOLESALE CORP /NEW Quarterly Report for Q2 Ended Feb 17, 2008

Summary

Key Highlights

Frequently Asked Questions