10-QPeriod: Q1 FY2014

COSTCO WHOLESALE CORP /NEW Quarterly Report for Q1 Ended Nov 24, 2013

Filed December 20, 2013For Securities:COST

Summary

Costco Wholesale Corporation reported a solid performance for the first quarter of fiscal year 2014, ending November 23, 2013. The company demonstrated revenue growth driven by increased comparable sales and the opening of new warehouses. Net income saw a modest increase, reflecting improved gross margins partially offset by higher selling, general, and administrative expenses. The company continues to focus on delivering value to its members, evidenced by strong membership renewal rates and a steady increase in membership fees. Financially, Costco maintained a strong liquidity position with substantial cash and short-term investments. The company is actively investing in its growth through new warehouse openings and capital expenditures, financed by operational cash flow and existing liquid assets. While facing some headwinds from foreign currency fluctuations and gasoline price changes, Costco's core business model remains robust, supported by its membership-based revenue stream and efficient operations.

Financial Highlights

44 data points
Beta

Revenue

$25.02B

12.8% Gross Margin

Net Income

$425.00M

1.7% Net Margin

EPS (Diluted)

$0.96

Total Assets

$32.32B

Cash & Equivalents

$4.70B

Free Cash Flow

$365.00M

Financial Statements
Beta
Revenue$25.02B
Cost of Revenue$21.82B
Gross Profit$3.19B
SG&A Expenses$2.50B
Operating Income$668.00M
Interest Expense$27.00M
Net Income$425.00M
EPS (Basic)$0.97
EPS (Diluted)$0.96
Shares Outstanding (Basic)437.97M
Shares Outstanding (Diluted)442.42M

Key Highlights

  • 1Total revenue increased by 5% to $25.02 billion compared to the prior year's first quarter.
  • 2Net income attributable to Costco rose by 2% to $425 million, translating to diluted EPS of $0.96, up from $0.95 in the prior year.
  • 3Comparable warehouse sales grew by 3%, with an adjusted 5% growth when excluding the impact of gasoline price and foreign currency fluctuations.
  • 4Membership fees increased by 7% to $549 million, driven by new sign-ups, Executive Membership growth, and recent fee increases.
  • 5Gross margin as a percentage of net sales improved by 13 basis points to 10.81%, indicating better cost management on merchandise.
  • 6The company opened 13 new warehouses in the quarter and plans for significant expansion throughout fiscal year 2014, with approximately $2.4 billion in planned capital expenditures.
  • 7Costco maintained strong financial health with $6.4 billion in cash and cash equivalents and short-term investments at the end of the quarter.

Frequently Asked Questions

Costco reported a 5% increase in total revenue, reaching $25.02 billion for the first quarter of fiscal 2014, driven by a 3% increase in comparable warehouse sales and contributions from newly opened warehouses.

Net income attributable to Costco increased by 2% to $425 million. Diluted earnings per share were $0.96, a slight increase from $0.95 in the same quarter of the prior year.

Costco opened 13 new warehouses in the first quarter and plans to open up to 18 more for the remainder of fiscal 2014. The company anticipates capital expenditures of approximately $2.4 billion for the full fiscal year, primarily for new and remodeled warehouses.

The company saw an increase in merchandise inventories, partly due to the timing of the Thanksgiving holiday. Gross margin as a percentage of net sales improved by 13 basis points, indicating effective management of merchandise costs. However, selling, general, and administrative expenses as a percentage of net sales increased by 17 basis points, partly due to higher stock-based compensation expense.