10-QPeriod: Q3 FY2021

COSTCO WHOLESALE CORP /NEW Quarterly Report for Q3 Ended May 9, 2021

Filed June 3, 2021For Securities:COST

Summary

Costco Wholesale Corporation reported robust financial performance for the 12-week period ended May 9, 2021. Net sales surged by 22% year-over-year to $44.4 billion, driven by a strong 21% increase in comparable sales and the opening of 22 new warehouses. This growth was supported by a healthy 11% rise in membership fee revenue to $901 million, reflecting continued member loyalty and expansion. Diluted earnings per share (EPS) rose significantly to $2.75 from $1.89 in the prior year's comparable period, indicating improved profitability. The company's operational efficiency is highlighted by a decrease in SG&A expenses as a percentage of net sales, which fell by 107 basis points. This was partly due to the cessation of incremental COVID-19 related wage costs. While gross margin percentage saw a slight decrease of 35 basis points, this was primarily attributed to a shift in sales mix and not a fundamental deterioration in pricing power. Overall, the results demonstrate Costco's continued ability to drive sales growth and manage expenses effectively in a dynamic retail environment.

Financial Highlights

51 data points
Beta

Revenue

$45.28B

12.9% Gross Margin

Net Income

$1.22B

2.7% Net Margin

EPS (Diluted)

$2.75

Total Assets

$57.27B

Cash & Equivalents

$10.23B

Free Cash Flow

$2.31B

Financial Statements
Beta
Revenue$45.28B
Cost of Revenue$39.41B
Gross Profit$5.86B
SG&A Expenses$4.20B
Operating Income$1.66B
Interest Expense$40.00M
Net Income$1.22B
EPS (Basic)$2.75
EPS (Diluted)$2.75
Shares Outstanding (Basic)443.04M
Shares Outstanding (Diluted)444.13M

Key Highlights

  • 1Net sales increased by 22% to $44.4 billion for the 12 weeks ended May 9, 2021, compared to the prior year.
  • 2Comparable sales grew by a strong 21%, indicating healthy organic growth.
  • 3Membership fee revenue increased by 11% to $901 million, highlighting strong member retention and growth.
  • 4Diluted earnings per share (EPS) rose to $2.75, a significant increase from $1.89 in the same period last year.
  • 5Selling, General, and Administrative (SG&A) expenses as a percentage of net sales decreased by 107 basis points, showcasing improved operational leverage.
  • 6The company declared and paid a quarterly cash dividend of $0.79 per share, signaling a commitment to returning capital to shareholders.

Frequently Asked Questions

The substantial increase in net sales was primarily driven by a strong 21% growth in comparable sales and the contribution of 22 new warehouses opened since the prior year's comparable period. This indicates robust organic growth and successful physical expansion.

Costco demonstrated effective expense management. Selling, General, and Administrative (SG&A) expenses as a percentage of net sales decreased by 107 basis points. This improvement was aided by the cessation of incremental wage and benefit costs related to COVID-19, which ended on February 28, 2021, and by leveraging increased sales volume. The company also noted a permanent wage increase for employees implemented in March 2021, which will impact future expenses.

Membership fee revenue increased by 11% to $901 million for the quarter. This growth is attributed to new member signups both in warehouses and online, as well as upgrades to Executive Membership. The company reported high renewal rates (91% in the U.S. and Canada, 88% worldwide), indicating continued member loyalty and a stable, recurring revenue stream.

The gross margin percentage decreased by 35 basis points year-over-year. This was mainly due to a shift in the sales mix from core merchandise categories to ancillary and other businesses, as well as increased spending by Executive Members under the 2% reward program. However, the impact of decreased incremental COVID-19 wages provided some offset.