10-QPeriod: Q1 FY2021

COSTCO WHOLESALE CORP /NEW Quarterly Report for Q1 Ended Nov 22, 2020

Filed December 16, 2020For Securities:COST

Summary

Costco Wholesale Corporation (COST) reported strong financial results for the fiscal first quarter ended November 22, 2020, demonstrating significant growth across key metrics. Net sales increased by a robust 17% year-over-year, reaching $42.35 billion, driven by a 15% increase in comparable sales and contributions from new warehouse openings. This performance was further bolstered by a 7% rise in membership fee revenue, indicating continued member loyalty and acquisition. The company also saw an improvement in gross margin percentage, up 50 basis points, and a decrease in SG&A as a percentage of net sales, suggesting effective cost management alongside sales growth. Net income attributable to Costco surged by 38% to $1.166 billion, translating to a diluted EPS of $2.62, a substantial increase from $1.90 in the prior year period. The company also announced a special cash dividend of $10.00 per share, demonstrating a strong commitment to returning capital to shareholders. Despite some headwinds from the COVID-19 pandemic, particularly in ancillary businesses and incremental wage costs, Costco's core operations, including fresh foods and e-commerce, showed resilience and strong performance, positioning the company favorably amidst a dynamic economic environment.

Financial Highlights

49 data points
Beta

Revenue

$43.21B

13.3% Gross Margin

Net Income

$1.17B

2.7% Net Margin

EPS (Diluted)

$2.62

Total Assets

$60.22B

Cash & Equivalents

$13.59B

Free Cash Flow

$1.75B

Financial Statements
Beta
Revenue$43.21B
Cost of Revenue$37.46B
Gross Profit$5.75B
SG&A Expenses$4.32B
Operating Income$1.43B
Interest Expense$39.00M
Net Income$1.17B
EPS (Basic)$2.63
EPS (Diluted)$2.62
Shares Outstanding (Basic)442.95M
Shares Outstanding (Diluted)444.39M

Key Highlights

  • 1Net sales increased 17% to $42.35 billion, driven by a 15% rise in comparable sales and new warehouse openings.
  • 2Membership fee revenue grew 7% to $861 million, indicating strong member retention and growth.
  • 3Net income attributable to Costco increased 38% to $1.166 billion.
  • 4Diluted Earnings Per Share (EPS) rose to $2.62, up from $1.90 in the prior year period.
  • 5Gross margin percentage improved by 50 basis points to 11.55%, supported by core merchandise categories.
  • 6Selling, General, and Administrative (SG&A) expenses as a percentage of net sales decreased by 15 basis points to 10.15%.
  • 7The company declared a special cash dividend of $10.00 per share, demonstrating robust capital return to shareholders.

Frequently Asked Questions

Costco reported a strong increase in net sales, up 17% to $42.35 billion for the 12 weeks ended November 22, 2020, compared to $36.24 billion in the same period last year. This growth was primarily driven by a 15% increase in comparable sales and the addition of new warehouses.

Net income attributable to Costco increased significantly by 38% to $1.166 billion from $844 million in the prior year. This was supported by higher net sales, improved gross margin, and efficient management of SG&A expenses.

While Costco incurred $212 million in incremental wages related to COVID-19, the company managed to decrease SG&A expenses as a percentage of net sales by 15 basis points to 10.15%. This was achieved by leveraging increased sales to gain operating efficiencies, despite the additional wage costs.

Costco opened 10 new warehouses (including relocations) in the first quarter of fiscal 2021 and plans to open an additional 12 to 14 new warehouses in the remainder of fiscal 2021. The company spent $893 million on capital expenditures in the quarter and expects to spend between $3 billion and $3.2 billion in fiscal 2021.