10-QPeriod: Q1 FY2017

COSTCO WHOLESALE CORP /NEW Quarterly Report for Q1 Ended Nov 20, 2016

Filed December 16, 2016For Securities:COST

Summary

Costco Wholesale Corporation reported its first quarter results for fiscal year 2017, ending November 20, 2016. The company demonstrated solid top-line growth with a 3% increase in net sales to $27.5 billion, driven by both new warehouse openings and a 1% rise in comparable sales. Membership fee revenue also saw a healthy 6% increase, indicating continued member loyalty and engagement, particularly with the Executive Membership program. Net income grew by 14% to $545 million, translating to diluted earnings per share of $1.24, up from $1.09 in the prior year's comparable quarter. The company's operational efficiency was highlighted by a 29 basis point increase in gross margin percentage, partly due to a non-recurring legal settlement, and despite a slight increase in SG&A as a percentage of net sales attributed to system modernization and payroll. Operationally, Costco continued its global expansion, opening eight net new warehouses during the quarter. While facing some price deflation in key categories like food and hardlines, the company managed these pressures through strategic pricing and merchandise mix adjustments. Management expressed confidence in the company's liquidity and capital resources, supported by robust operating cash flows and existing cash reserves, to fund future growth and operations. The company also continued its commitment to shareholder returns by declaring a quarterly cash dividend of $0.45 per share.

Financial Highlights

48 data points
Beta

Revenue

$28.10B

13.6% Gross Margin

Net Income

$545.00M

1.9% Net Margin

EPS (Diluted)

$1.24

Total Assets

$36.53B

Cash & Equivalents

$4.80B

Free Cash Flow

$2.13B

Financial Statements
Beta
Revenue$28.10B
Cost of Revenue$24.29B
Gross Profit$3.81B
SG&A Expenses$2.94B
Operating Income$849.00M
Interest Expense$29.00M
Net Income$545.00M
EPS (Basic)$1.24
EPS (Diluted)$1.24
Shares Outstanding (Basic)438.01M
Shares Outstanding (Diluted)440.52M

Key Highlights

  • 1Net sales increased by 3% to $27.5 billion for the first quarter of fiscal year 2017.
  • 2Comparable sales saw a 1% increase, driven by increased shopping frequency.
  • 3Membership fee revenue grew by 6%, reflecting strong member loyalty and program uptake.
  • 4Net income rose by 14% to $545 million, with diluted EPS of $1.24.
  • 5Gross margin percentage improved by 29 basis points, aided by a non-recurring legal settlement.
  • 6The company opened eight net new warehouses during the quarter, continuing its global expansion.
  • 7Costco declared a quarterly cash dividend of $0.45 per share.

Frequently Asked Questions

Costco's net sales increased by 3% to $27.5 billion in the first quarter of fiscal year 2017, compared to the same period in the prior year. This growth was attributed to sales from newly opened warehouses and a 1% increase in comparable sales.

Membership fee revenue increased by 6% to $630 million in the first quarter of fiscal year 2017. This growth was primarily driven by new member sign-ups at existing and new warehouses and an increase in Executive memberships.

Net income attributable to Costco increased by 14% to $545 million in the first quarter of fiscal year 2017, resulting in diluted earnings per share of $1.24, up from $1.09 in the prior year's quarter. The gross margin percentage also improved by 29 basis points.

Costco opened eight net new warehouses in the first quarter and plans to open up to 23 more for the remainder of fiscal year 2017. Capital expenditures are expected to be between $2.6 billion and $2.8 billion for the full fiscal year, funded by cash flow from operations and existing cash reserves. The company also continued to return capital to shareholders through a quarterly dividend of $0.45 per share.