Summary
Costco Wholesale Corporation (COST) reported its second-quarter fiscal 2017 results, ending February 12, 2017. The company demonstrated solid top-line growth, with net sales increasing 6% year-over-year to $29.1 billion, driven by a 3% increase in comparable sales and the opening of new warehouses. Membership fee revenue also saw a healthy 5% increase, indicating continued member loyalty and growth in the Executive Membership program. Despite a slight decrease in gross margin percentage (primarily due to lower ancillary business margins and gasoline price impacts), the company managed SG&A expenses effectively, resulting in a modest increase in operating income. Net income for the quarter was $515 million, or $1.17 per diluted share, a slight decrease from the prior year's $546 million, or $1.24 per diluted share, influenced by a lower gross margin and higher SG&A as a percentage of adjusted net sales. However, cash flow from operations remained strong, providing substantial liquidity. Investors should note the announcement of upcoming membership fee increases in the U.S. and Canada, which are expected to bolster future revenue, though they did not impact the current quarter's results.
Financial Highlights
48 data points| Revenue | $29.77B |
| Cost of Revenue | $25.93B |
| Gross Profit | $3.84B |
| SG&A Expenses | $2.98B |
| Operating Income | $844.00M |
| Interest Expense | $31.00M |
| Net Income | $515.00M |
| EPS (Basic) | $1.17 |
| EPS (Diluted) | $1.17 |
| Shares Outstanding (Basic) | 439.13M |
| Shares Outstanding (Diluted) | 440.66M |
Key Highlights
- 1Net sales for the second quarter increased by 6% to $29.1 billion, driven by comparable sales growth of 3% and contributions from new warehouse openings.
- 2Membership fee revenue rose by 5% to $636 million, reflecting growth in member sign-ups and executive memberships.
- 3Gross margin percentage saw a slight decrease of 24 basis points to 11.00%, mainly impacted by lower margins in ancillary businesses and gasoline prices.
- 4Selling, general, and administrative (SG&A) expenses as a percentage of net sales decreased by 5 basis points, indicating effective cost management.
- 5Net income attributable to Costco decreased by 6% to $515 million ($1.17 per diluted share) compared to $546 million ($1.24 per diluted share) in the prior year's quarter.
- 6The company announced an increase in annual membership fees for the U.S. and Canada, effective June 1, 2017, which is expected to positively impact future revenue.
- 7Strong operating cash flow of $3.3 billion for the first half of the fiscal year provided significant liquidity.