10-QPeriod: Q1 FY2018

COSTCO WHOLESALE CORP /NEW Quarterly Report for Q1 Ended Nov 26, 2017

Filed December 21, 2017For Securities:COST

Summary

Costco Wholesale Corporation reported strong financial performance for the first quarter of fiscal year 2018, ending November 25, 2017. Net sales surged by 13% to $31.1 billion, driven by a robust 10% increase in comparable sales across all segments. This growth reflects increased shopping frequency and higher average ticket prices, demonstrating continued customer loyalty and effective merchandising. Profitability saw a significant boost, with net income attributable to Costco rising 17% to $640 million, translating to diluted earnings per share of $1.45. This improvement was supported by strong revenue growth, effective expense management leading to a decrease in SG&A as a percentage of net sales, and a favorable impact from adopting a new accounting standard for stock-based compensation. The company also continued its capital allocation strategy, returning value to shareholders through dividends and share repurchases, signaling confidence in its operational strength and future prospects.

Financial Highlights

49 data points
Beta

Revenue

$31.81B

13.2% Gross Margin

Net Income

$640.00M

2.0% Net Margin

EPS (Diluted)

$1.45

Total Assets

$39.38B

Cash & Equivalents

$5.69B

Free Cash Flow

$1.19B

Financial Statements
Beta
Revenue$31.81B
Cost of Revenue$27.62B
Gross Profit$4.19B
SG&A Expenses$3.22B
Operating Income$951.00M
Interest Expense$37.00M
Net Income$640.00M
EPS (Basic)$1.46
EPS (Diluted)$1.45
Shares Outstanding (Basic)437.96M
Shares Outstanding (Diluted)440.85M

Key Highlights

  • 1Net sales increased by 13% to $31.1 billion for the quarter.
  • 2Comparable sales grew by a strong 10%, indicating healthy underlying business performance.
  • 3Net income attributable to Costco rose 17% to $640 million, with diluted EPS at $1.45.
  • 4Membership fee revenue saw a 10% increase, driven by member sign-ups and recent fee adjustments.
  • 5SG&A expenses as a percentage of net sales decreased by 34 basis points, demonstrating operating leverage.
  • 6The company declared a quarterly cash dividend of $0.50 per share, up from $0.45 in the prior year.
  • 7Costco repurchased $119 million of its common stock during the quarter.

Frequently Asked Questions

Net sales increased by 13% to $31.1 billion primarily due to a 10% increase in comparable sales across all segments (U.S., Canada, and Other International). This growth was also supported by sales from the 23 net new warehouses opened since the prior year. Changes in gasoline prices and foreign currency exchange rates also contributed positively to reported net sales.

Net income attributable to Costco increased by 17% to $640 million, with diluted earnings per share rising to $1.45 from $1.24 in the prior year's comparable quarter. This improvement was driven by strong sales growth, improved operating leverage (lower SG&A as a percentage of sales), and a $41 million tax benefit related to the adoption of a new accounting standard for stock-based compensation. A prior year's legal settlement benefit was not present in the current quarter.

Membership fee revenue grew by 10% to $692 million. This growth is attributed to new member sign-ups at existing and new warehouses, as well as the impact of recent membership fee increases implemented in the U.S., Canada, and Other International markets. Renewal rates remain strong at 90% in the U.S. and Canada and 87% worldwide.

Costco continued to return capital to shareholders. The Board of Directors declared a quarterly cash dividend of $0.50 per share, an increase from the previous year's $0.45 per share. Additionally, the company repurchased $119 million of its common stock during the quarter, with a substantial $2.63 billion remaining available under its stock repurchase program.