10-QPeriod: Q1 FY2013

COSTCO WHOLESALE CORP /NEW Quarterly Report for Q1 Ended Nov 25, 2012

Filed December 21, 2012For Securities:COST

Summary

Costco Wholesale Corporation's (COST) Form 10-Q for the quarter ended November 25, 2012, demonstrates a strong financial performance characterized by robust sales growth and increased profitability. Net sales surged by 9.6% year-over-year, driven by a healthy 7% increase in comparable warehouse sales and contributions from new store openings. The company also saw a significant 14.4% rise in membership fees, indicating strong member loyalty and the positive impact of recent membership fee adjustments. Profitability improved as well, with net income attributable to Costco increasing by 30% to $416 million, or $0.95 per diluted share. This was supported by a slight improvement in gross margin and selling, general, and administrative (SG&A) expenses as a percentage of net sales. The company maintained a strong liquidity position, with total assets growing and robust operating cash flows, allowing for continued investment in expansion and a significant special cash dividend declared shortly after the quarter's end.

Financial Highlights

46 data points
Beta

Revenue

$23.71B

12.6% Gross Margin

Net Income

$416.00M

1.8% Net Margin

EPS (Diluted)

$0.95

Total Assets

$29.32B

Cash & Equivalents

$3.90B

Free Cash Flow

$614.00M

Financial Statements
Beta
Revenue$23.71B
Cost of Revenue$20.73B
Gross Profit$2.99B
SG&A Expenses$2.33B
Operating Income$639.00M
Interest Expense$13.00M
Net Income$416.00M
EPS (Basic)$0.96
EPS (Diluted)$0.95
Shares Outstanding (Basic)433.42M
Shares Outstanding (Diluted)438.64M

Key Highlights

  • 1Net sales increased by 9.6% to $23.2 billion, driven by comparable sales growth of 7% and 25 new warehouse openings.
  • 2Membership fees increased by 14.4% to $511 million, reflecting higher membership fees and strong renewal rates (89.7% in US/Canada).
  • 3Net income attributable to Costco grew by 30% to $416 million, resulting in diluted EPS of $0.95, up from $0.73 in the prior year period.
  • 4Gross margin improved slightly to 10.68% of net sales, benefiting from improved ancillary businesses like gasoline, despite slight pressure in core merchandise categories.
  • 5Selling, general, and administrative expenses as a percentage of net sales improved by 7 basis points, primarily due to leverage from sales growth and a one-time benefit from a prior year alcohol law initiative.
  • 6The company generated strong operating cash flow of $1.1 billion, supporting capital expenditures and financing activities.
  • 7Subsequent to the quarter, Costco declared a substantial special cash dividend of $7.00 per share, amounting to approximately $3.05 billion, funded partly by a significant Senior Notes issuance.

Frequently Asked Questions

Costco's sales growth was primarily driven by a 7% increase in comparable warehouse sales and the contribution from 25 net new warehouses opened since the beginning of the fiscal year. The increase in membership fees also contributed significantly.

Costco demonstrated effective expense management. Selling, general, and administrative (SG&A) expenses as a percentage of net sales improved by seven basis points, aided by sales leverage and a favorable comparison to a prior year expense. Gross margin also saw a slight increase as a percentage of net sales.

The company maintains a strong liquidity position with $5.58 billion in cash and cash equivalents and short-term investments. Net cash provided by operating activities was robust at $1.1 billion, enabling the company to fund capital expenditures and return capital to shareholders.

Yes, subsequent to the quarter's end, Costco declared a significant special cash dividend of $7.00 per share, totaling approximately $3.05 billion, which was paid in December 2012. Additionally, the company issued $3.5 billion in Senior Notes to help fund this dividend and for general corporate purposes.