COSTCO WHOLESALE CORP /NEW Quarterly Report for Q3 Ended May 8, 2011

Summary

Costco Wholesale Corporation (COST) reported its third-quarter results for the period ending May 8, 2011. The company demonstrated strong top-line growth, with net sales increasing by 16.1% year-over-year, driven by a healthy 12% increase in comparable sales and the addition of new warehouse locations. Membership fees also saw a significant rise of 10.4%, indicating continued member engagement and growth, particularly in the Executive Membership program. While revenue growth was robust, gross margin as a percentage of net sales saw a slight decrease of 38 basis points, impacted by a LIFO inventory charge and the increased penetration of lower-margin gasoline sales. However, selling, general, and administrative expenses as a percentage of net sales improved, leading to a 6.1% increase in net income attributable to Costco. The company also announced a 17.1% increase in its quarterly cash dividend and authorized a substantial new $4 billion share repurchase program, signaling confidence in its financial position and commitment to shareholder returns.

Key Highlights

• 1Net sales increased by 16.1% to $20.19 billion, with comparable sales up 12%.
• 2Membership fees grew by 10.4% to $435 million, driven by Executive Membership penetration.
• 3Gross margin decreased by 38 basis points to 10.50% of net sales, impacted by LIFO inventory charges and gasoline sales.
• 4Selling, general, and administrative (SG&A) expenses as a percentage of net sales decreased by 43 basis points.
• 5Net income attributable to Costco increased by 6.1% to $324 million, or $0.73 per diluted share.
• 6The quarterly cash dividend was increased by 17.1% to $0.24 per share.
• 7A new $4 billion share repurchase program was authorized, with $792 million from a previous program being revoked and replaced.

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