10-QPeriod: Q3 FY2010

COSTCO WHOLESALE CORP /NEW Quarterly Report for Q3 Ended May 9, 2010

Filed June 10, 2010For Securities:COST

Summary

Costco Wholesale Corporation (COST) reported strong financial results for the third quarter of fiscal year 2010, ending May 9, 2010. The company demonstrated robust sales growth, with net sales increasing by 12.3% year-over-year, driven by a 10% increase in comparable sales and contributions from new warehouse openings. Membership fees also saw a significant rise of 20.1%, indicating strong member retention and growth, particularly in the Executive Membership program. Profitability improved substantially, with net income attributable to Costco surging by 45.8% to $306 million, leading to a diluted EPS of $0.68, up from $0.48 in the prior year period. This performance was supported by effective cost management, with Selling, General, and Administrative (SG&A) expenses decreasing as a percentage of net sales. The company also continued its commitment to shareholder returns, increasing its quarterly cash dividend by 13.9% on an annualized basis. Costco's balance sheet remains strong, with solid cash flows from operations.

Financial Highlights

46 data points
Beta

Revenue

$17.78B

12.9% Gross Margin

Net Income

$306.00M

1.7% Net Margin

EPS (Diluted)

$0.68

Total Assets

$23.90B

Cash & Equivalents

$4.41B

Free Cash Flow

$671.00M

Financial Statements
Beta
Revenue$17.78B
Cost of Revenue$15.49B
Gross Profit$2.29B
SG&A Expenses$1.79B
Operating Income$491.00M
Interest Expense$27.00M
Net Income$306.00M
EPS (Basic)$0.69
EPS (Diluted)$0.68
Shares Outstanding (Basic)440.97M
Shares Outstanding (Diluted)448.39M

Key Highlights

  • 1Net sales increased by 12.3% to $17.385 billion, driven by a 10% increase in comparable sales.
  • 2Membership fees grew by 20.1% to $395 million, reflecting strong member growth and retention, especially in the Executive Membership program.
  • 3Net income attributable to Costco increased significantly by 45.8% to $306 million.
  • 4Diluted Earnings Per Share (EPS) rose to $0.68 from $0.48 in the prior year's third quarter.
  • 5Selling, General, and Administrative (SG&A) expenses decreased as a percentage of net sales by 40 basis points, indicating effective cost control.
  • 6The company declared a quarterly cash dividend of $0.205 per share, an increase of 13.9% on an annualized basis.
  • 7Cash and cash equivalents and short-term investments totaled $5.267 billion, providing ample liquidity.

Frequently Asked Questions

The primary driver of Costco's sales growth was a 10% increase in comparable sales, coupled with contributions from the 12 net new warehouses opened since the prior year's third quarter. Favorable foreign currency exchange rates and higher gasoline prices also positively impacted net sales.

Costco demonstrated effective cost management, with Selling, General, and Administrative (SG&A) expenses decreasing by 40 basis points as a percentage of net sales. This was achieved through various efficiencies, although partially offset by increases in employee healthcare costs and workers' compensation.

The company continues to prioritize shareholder returns. In the third quarter, the Board of Directors declared a quarterly cash dividend of $0.205 per share, representing a 13.9% increase on an annualized basis. Costco also has an ongoing stock repurchase program, with approximately $1.873 billion remaining available at the end of the quarter.

Costco maintains a strong liquidity position. As of May 9, 2010, the company had $4.413 billion in cash and cash equivalents and $854 million in short-term investments, totaling $5.267 billion. Net cash provided by operating activities for the first thirty-six weeks of fiscal 2010 was $2.169 billion.