10-QPeriod: Q2 FY2022

COSTCO WHOLESALE CORP /NEW Quarterly Report for Q2 Ended Feb 13, 2022

Filed March 10, 2022For Securities:COST

Summary

Costco Wholesale Corporation reported strong financial results for the second quarter and first half of fiscal year 2022, ending February 13, 2022. Net sales saw a significant increase of 16% year-over-year for both periods, driven by robust comparable sales growth of 14% and 15%, respectively, and contributions from newly opened warehouses. Membership fee revenue also grew by 10%, indicating strong member loyalty and an expanding customer base. Despite a slight decrease in gross margin percentage due to merchandise costs and LIFO charges, the company effectively managed its operating expenses, with SG&A as a percentage of net sales decreasing significantly. Net income and diluted earnings per share showed substantial year-over-year improvement, reflecting improved operational efficiency and sales growth. The company also continued its commitment to shareholder returns through a consistent quarterly dividend and active share repurchase program.

Financial Highlights

50 data points
Beta

Revenue

$51.90B

12.3% Gross Margin

Net Income

$1.30B

2.5% Net Margin

EPS (Diluted)

$2.92

Total Assets

$63.08B

Cash & Equivalents

$11.82B

Free Cash Flow

-$322.00M

Financial Statements
Beta
Revenue$51.90B
Cost of Revenue$45.52B
Gross Profit$6.39B
SG&A Expenses$4.58B
Operating Income$1.81B
Interest Expense$36.00M
Net Income$1.30B
EPS (Basic)$2.93
EPS (Diluted)$2.92
Shares Outstanding (Basic)443.62M
Shares Outstanding (Diluted)444.92M

Key Highlights

  • 1Net sales increased by 16% to $50.9 billion for the 12-week period and $100.4 billion for the 24-week period, year-over-year.
  • 2Comparable sales grew by 14% in the second quarter and 15% in the first half, demonstrating continued customer demand.
  • 3Membership fee revenue rose by 10% to $967 million in the second quarter, reflecting strong member retention and acquisition.
  • 4Net income attributable to Costco increased to $1.3 billion ($2.92 per diluted share) for the second quarter and $2.6 billion ($5.90 per diluted share) for the first half, marking significant year-over-year growth.
  • 5Selling, General, and Administrative (SG&A) expenses as a percentage of net sales decreased by 94 basis points in the second quarter and 80 basis points in the first half, indicating improved operational leverage.
  • 6The company declared a quarterly cash dividend of $0.79 per share, a 13% increase from the prior year's comparable quarter ($0.70).
  • 7Capital expenditures for the first half of fiscal 2022 were $1.8 billion, with a full-year plan of approximately $4.0 billion, focused on new warehouse development.

Frequently Asked Questions

Costco's revenue growth was primarily driven by a significant increase in net sales, up 16% year-over-year, fueled by robust comparable sales growth of 14% in the second quarter and 15% in the first half. This growth was further supported by the addition of new warehouses.

Gross margin percentage saw a slight decrease of 32 basis points compared to the prior year's second quarter. This was mainly due to merchandise costs and a LIFO charge for higher inventory costs. However, excluding the impact of gasoline price inflation, gross margin percentage actually increased slightly, and improvements in warehouse ancillary businesses and a reduction in COVID-19 related wage expenses provided some offset.

Costco's capital allocation strategy includes significant investment in new warehouse development, with plans for approximately $4.0 billion in capital expenditures for fiscal year 2022. To return value to shareholders, the company consistently pays a quarterly cash dividend, which was increased to $0.79 per share, and maintains an active share repurchase program under a $4 billion authorization.

SG&A expenses as a percentage of net sales decreased significantly, by 94 basis points in the second quarter. This improvement was largely due to leveraging increased sales, the cessation of incremental COVID-19 related wages from the prior year, and efficiencies in warehouse operations.