COSTCO WHOLESALE CORP /NEW Quarterly Report for Q1 Ended Nov 24, 2019

Summary

Costco Wholesale Corporation reported solid financial results for the first quarter of fiscal year 2020, ending November 24, 2019. The company demonstrated robust top-line growth with a 6% increase in net sales to $36.2 billion, driven by a 4% rise in comparable sales and contributions from new warehouse openings. Membership fees also saw a healthy 6% increase, contributing $804 million and underscoring the strength of Costco's membership model. Profitability showed a significant improvement, with net income rising 10% to $844 million, translating to diluted earnings per share of $1.90, up from $1.73 in the prior year's quarter. This growth was supported by a 30 basis point increase in gross margin percentage, partly due to improvements in ancillary businesses and a favorable adjustment in the prior year's rewards breakage estimate. While selling, general, and administrative (SG&A) expenses increased as a percentage of sales, the overall performance reflects strong operational execution and continued member loyalty.

Key Highlights

• 1Net sales increased by 6% to $36.2 billion, driven by comparable sales growth of 4% and contributions from 17 new warehouses.
• 2Membership fee revenue grew by 6% to $804 million, indicating continued member loyalty and growth.
• 3Net income increased by 10% to $844 million, resulting in diluted EPS of $1.90, up from $1.73 in the prior year's quarter.
• 4Gross margin percentage improved by 30 basis points, boosted by ancillary businesses and a prior year adjustment for credit card rewards breakage.
• 5The company repurchased 100,000 shares of common stock for $30 million during the quarter, with $3.913 billion remaining on its repurchase authorization.
• 6Costco declared a quarterly cash dividend of $0.65 per share, a slight increase from the previous year's $0.57.
• 7Operating cash flow remained strong at $2.1 billion, supporting investments and financing activities.

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