10-QPeriod: Q1 FY2022

COSTCO WHOLESALE CORP /NEW Quarterly Report for Q1 Ended Nov 21, 2021

Filed December 22, 2021For Securities:COST

Summary

Costco Wholesale Corporation (COST) reported strong performance for the first quarter of fiscal year 2022, ending November 21, 2021. The company saw a significant increase in net sales, up 17% year-over-year, driven by robust comparable sales growth of 15% and the addition of new warehouses. Membership fee revenue also grew by a healthy 10%, indicating sustained member loyalty and the success of membership programs, particularly Executive Memberships. Despite some pressures on gross margin, largely due to merchandise cost inflation and the impact of gasoline price fluctuations, Costco demonstrated effective cost management. Selling, general, and administrative (SG&A) expenses as a percentage of net sales decreased, benefiting from increased sales leverage and the cessation of COVID-19 related incremental wages. Diluted earnings per share (EPS) saw a notable increase to $2.98 from $2.62 in the prior year, reflecting the company's ability to translate sales growth into improved profitability. The company also maintained a strong liquidity position and continued its capital allocation strategies through dividends and share repurchases.

Financial Highlights

49 data points
Beta

Revenue

$50.36B

12.7% Gross Margin

Net Income

$1.32B

2.6% Net Margin

EPS (Diluted)

$2.98

Total Assets

$64.15B

Cash & Equivalents

$12.75B

Free Cash Flow

$2.20B

Financial Statements
Beta
Revenue$50.36B
Cost of Revenue$43.95B
Gross Profit$6.41B
SG&A Expenses$4.72B
Operating Income$1.69B
Interest Expense$39.00M
Net Income$1.32B
EPS (Basic)$2.99
EPS (Diluted)$2.98
Shares Outstanding (Basic)443.38M
Shares Outstanding (Diluted)444.60M

Key Highlights

  • 1Net sales surged by 17% to $49.4 billion, driven by a 15% increase in comparable sales and contributions from 20 new warehouses.
  • 2Membership fee revenue grew 10% to $946 million, boosted by new sign-ups, Executive Member upgrades, and improved renewal rates.
  • 3Diluted earnings per share (EPS) increased to $2.98, up from $2.62 in the prior year's comparable period.
  • 4Gross margin percentage decreased by 49 basis points to 11.06%, primarily impacted by merchandise cost inflation in core categories.
  • 5SG&A expenses as a percentage of net sales improved, decreasing by 65 basis points to 9.55%, due to sales leverage and the end of COVID-19 related wage costs.
  • 6The company maintained a strong operating cash flow of $3.26 billion.
  • 7Costco paid a quarterly cash dividend of $0.79 per share and continued its share repurchase program.

Frequently Asked Questions

Costco's net sales increased by 17% to $49.4 billion, primarily driven by a strong 15% increase in comparable sales. This growth was also supported by the addition of 20 new warehouses opened since the end of the previous fiscal year's first quarter.

Costco demonstrated effective expense management. Selling, general, and administrative (SG&A) expenses as a percentage of net sales decreased by 65 basis points. This improvement was attributed to leveraging increased sales volume and the cessation of incremental wages related to COVID-19.

The membership business remains a strong contributor, with membership fee revenue increasing by 10% to $946 million. This growth was fueled by new member sign-ups, upgrades to Executive Membership, and an increase in renewal rates, which stood at 92% in the U.S. and Canada and 89% worldwide.

While net income attributable to Costco increased to $1.324 billion, resulting in a diluted EPS of $2.98, the gross margin percentage saw a slight decrease of 49 basis points. This was primarily due to merchandise cost inflation and changes in gasoline prices. However, the reduction in SG&A expenses as a percentage of sales helped to offset some of these pressures.