10-QPeriod: Q1 FY2011

COSTCO WHOLESALE CORP /NEW Quarterly Report for Q1 Ended Nov 21, 2010

Filed December 17, 2010For Securities:COST

Summary

Costco Wholesale Corporation's 10-Q filing for the quarter ended November 21, 2010, indicates a strong operational performance with a notable increase in net sales and net income compared to the prior year's comparable period. The company reported an 11.2% rise in net sales, driven by a 7% increase in comparable sales and contributions from new warehouse openings. Membership fees also saw a healthy increase of 10.2%, reflecting growth in both new sign-ups and the executive membership program. Financially, Costco demonstrated improved profitability with a higher gross margin and a decrease in selling, general, and administrative expenses as a percentage of net sales. Net income attributable to Costco grew by 17.4%, translating to an increase in diluted earnings per share. The company also initiated a stock repurchase program in this quarter, demonstrating a commitment to returning capital to shareholders. The adoption of new accounting standards led to the consolidation of Costco Mexico, which increased total assets and liabilities but had no impact on net income attributable to Costco.

Financial Highlights

48 data points
Beta

Revenue

$19.24B

12.9% Gross Margin

Net Income

$312.00M

1.6% Net Margin

EPS (Diluted)

$0.71

Total Assets

$26.04B

Cash & Equivalents

$3.74B

Free Cash Flow

$414.00M

Financial Statements
Beta
Revenue$19.24B
Cost of Revenue$16.76B
Gross Profit$2.48B
SG&A Expenses$1.95B
Operating Income$525.00M
Interest Expense$26.00M
Net Income$312.00M
EPS (Basic)$0.72
EPS (Diluted)$0.71
Shares Outstanding (Basic)434.10M
Shares Outstanding (Diluted)441.36M

Key Highlights

  • 1Net sales increased by 11.2% to $18,823 million compared to the prior year's quarter.
  • 2Comparable sales grew by 7%, indicating sustained customer demand.
  • 3Membership fees rose by 10.2% to $416 million.
  • 4Net income attributable to Costco increased by 17.4% to $312 million.
  • 5Diluted earnings per share improved to $0.71 from $0.60 in the prior year's quarter.
  • 6The company repurchased approximately $150 million of its common stock during the quarter.
  • 7Costco Mexico was consolidated for financial reporting purposes due to the adoption of new accounting standards.

Frequently Asked Questions

Costco's sales growth was primarily driven by an increase in comparable warehouse sales (up 7%) and the contribution of 21 new warehouses opened since the end of fiscal year 2009. Foreign currency exchange rate strengthening, particularly in Canada, and an increase in gasoline prices also positively impacted net sales.

The consolidation of Costco Mexico, due to the adoption of new accounting standards, increased total assets and liabilities by approximately 3%. However, it had no impact on net income attributable to Costco as the noncontrolling interest of the joint venture partner was presented separately.

While the company acknowledges the negative impact of general economic conditions on consumer spending, it believes its business model positions it favorably to compete. Management emphasizes sales growth, particularly comparable sales growth, and cost control as key drivers of profitability. The company plans to continue investing in new warehouses, with approximately $1,600 million allocated for capital expenditures in fiscal year 2011.

Yes, Costco declared a quarterly cash dividend of $0.205 per share, which was paid in the first quarter of fiscal 2011. Additionally, the company repurchased approximately $150 million of its common stock during the quarter, indicating a commitment to shareholder returns.