Costco Wholesale Corporation
) came out with third-quarter fiscal 2013 results today. The
quarterly earnings of $1.04 per share beat the Zacks Consensus
Estimate by a couple of cents, and surged 18.2% from 88 cents
earned in the prior-year period.
The boost in the bottom-line was buoyed by growth in the
top-line due to rise in membership fees and improved sales of
discretionary items, as consumers seeking discounts started
flocking to warehouse clubs.
The warehouse retailer's total revenue, which includes net
sales and membership fee, climbed 7.9% to $24,083 million from
the prior-year quarter, but fell short of the Zacks Consensus
Estimate of $25,096 million. Net sales jumped 7.8% to $23,552
million, whereas membership fee rose 11.8% to $531 million.
Costco's comparable-store sales for the quarter ascended 5%
buoyed by a 6% and a 4% jump in comparable-store sales in the
U.S. and international locations, respectively. The results were
adversely impacted by fluctuation in gasoline prices and foreign
currencies rate. In the prior-year quarter, the company delivered
comparable-store sales growth of 5%.
Excluding the effects of gasoline prices and foreign
currencies, the company witnessed comparable-store sales growth
of 7%, with U.S. and international sales increasing by an
Recently, Costco came out with comparable-store sales data for
the month of April. The company delivered comparable-store sales
growth of 4% in April, following an equal increase in March, and
reflecting comparable sales growth of 4% at its U.S. locations
and 3% at international outlets. In the prior-year period, the
company delivered comparable-store sales growth of 4%.
Costco's operating income soared 15.9% to $722 million,
whereas operating margin (as a percentage of total revenue)
expanded marginally by 20 basis points to 3%.
Costco ended the quarter with cash and cash equivalents of
$5,448 million, long-term debt of $4,887 million, and
shareholders' equity of $10,472 million, excluding
non-controlling interests of $175
Costco continues to be a dominant retail wholesaler based on
the breadth and quality of the merchandises it offers. The
company's strategy to sell products at heavily discounted prices
has helped it sustain growth amidst beleaguered economic
conditions, as cash-strapped customers continue to reckon Costco
as a viable option for low-cost necessities.
Having delivered consistent comparable-store sales growth, the
company is well positioned in the warehouse club industry. The
company's diversification strategy is a natural hedge against
risks that may arise in specific markets.
However, Costco faces stiff competition from
) and Sam's Club, a division of
Wal-Mart Stores Inc.
), which follows a similar business model that pushes through
high volumes of merchandise at low prices in membership-only
warehouse clubs. Thus, aggressive pricing to gain market share
and drive traffic amid stiff competition may depress sales and
Costco currently operates 627 warehouses, comprising 449
warehouses in the United States and Puerto Rico, 85 in Canada, 33
in Mexico, 24 in the United Kingdom, 15 in Japan, 9 in Taiwan, 9
in Korea, and 3 in Australia.
Going by the pulse of the economy, we believe that
budget-constrained consumers will remain watchful on their
spending and look for discounts. Consequently, we could see more
competitive pricing, compelling products and innovative ways to
Currently, Costco holds a Zacks Rank #3 (Hold). Other stock
worth considering in the non-food retail-wholesale sector is
Bon-Ton Stores Inc.
) that carries a Zacks Rank #1 (Strong Buy).
BON-TON STORES (BONT): Get Free Report
COSTCO WHOLE CP (COST): Free Stock Analysis
TARGET CORP (TGT): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis
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