COSTCO WHOLESALE CORP /NEW Quarterly Report for Q2 Ended Feb 18, 2018

Summary

Costco Wholesale Corporation (COST) reported its second-quarter results for fiscal year 2018, ending February 18, 2018. The company demonstrated strong top-line growth, with net sales increasing by 11% to $32.3 billion, driven by an 8% rise in comparable sales. Membership fee revenue also saw a significant boost of 13%, partially attributed to a recent membership fee increase. Despite a slight decrease in gross margin percentage due to gasoline price inflation, the company managed to improve its operating efficiency, with selling, general, and administrative (SG&A) expenses as a percentage of net sales decreasing by 21 basis points. Net income saw a substantial increase of 36% to $701 million, resulting in diluted earnings per share of $1.59. This strong performance was notably aided by a tax benefit of $74 million related to the Tax Cuts and Jobs Act of 2017, which lowered the effective tax rate. The company also continued its shareholder return initiatives, declaring a quarterly cash dividend of $0.50 per share and actively repurchasing its stock. Overall, Costco demonstrated robust operational execution and benefited from favorable tax reforms during the quarter.

Key Highlights

• 1Net sales grew 11% to $32.3 billion, driven by an 8% increase in comparable sales.
• 2Membership fee revenue increased by 13%, benefiting from a recent fee hike and member growth.
• 3Net income rose 36% to $701 million, with diluted EPS of $1.59.
• 4The company recognized a $74 million tax benefit from the Tax Cuts and Jobs Act, reducing the effective tax rate.
• 5SG&A expenses as a percentage of net sales improved by 21 basis points, indicating operational leverage.
• 6Costco declared a quarterly cash dividend of $0.50 per share, demonstrating a commitment to returning capital to shareholders.
• 7The company continued its share repurchase program, with $2.57 billion remaining authorized.

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