Costco Wholesale Corporation
) came out with its fourth-quarter fiscal 2013 results today. The
quarterly earnings of $1.40 per share came ahead of the
prior-year quarter earnings of $1.39. However, the earnings
missed the Zacks Consensus Estimate of $1.46 per share as the
rate of increase in sales decelerated.
Let's Unveil Further
The warehouse retailer's total revenue, which includes net
sales and membership fee, climbed 0.8% to $32,487 million from
the prior-year quarter, but fell short of the Zacks Consensus
Estimate of $32,702 million. Moreover, the top-line growth rate
narrowed to 0.8% in the reported quarter from 7.9% in
third-quarter of fiscal 2013. Quarterly net sales rose 0.8% to
$31,771 million, whereas membership fee rose 3.2% to $716
Costco's comparable-store sales for the quarter increased 5%
buoyed by a 5% and a 4% rise in comparable-store sales in the
U.S. and international locations, respectively. The results were
adversely affected by fluctuation in foreign currencies rate. In
the year-ago quarter, the company delivered comparable-store
sales growth of 5%.
Excluding the effect of foreign currencies, the company
witnessed comparable-store sales growth of 5%, with U.S. and
international comps increasing by 5% and 7%, respectively.
Recently, Costco came out with comparable-store sales data for
the month of September. The company delivered comparable-store
sales growth of 3%, following an increase of 4% in August, and
registered comparable sales growth of 4% at its U.S. locations.
In the prior-year period, the company delivered comparable-store
sales growth of 6%.
Excluding the effect of gasoline prices and foreign
currencies, the company witnessed comparable-store sales growth
of 5% for the month of September, with the U.S. and international
comps rising by 5% and 6%, respectively.
Net sales for the month increased 6% to $9.86 billion from
Coming to the quarter, Costco's operating income inched up
0.5% to $954 million, whereas, operating margin (as a percentage
of total revenue) remained flat at 2.9%.
Costco ended the quarter with cash and cash equivalents of
$4,644 million, long-term debt of $4,998 million, and
shareholders' equity of $10,833 million, excluding
non-controlling interests of $179
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 amid 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 638 warehouses, comprising 454
warehouses in the United States and Puerto Rico, 85 in Canada, 34
in Mexico, 25 in the United Kingdom, 18 in Japan, 10 in Taiwan, 9
in Korea, and 3 in Australia. The company plans to open 11 more
new warehouses before this calendar year ends.
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
attract shoppers. Currently, Costco holds a Zacks Rank #3 (Hold).
The other stock worth considering in the retail sector is
Dollar General Corporation
) that carries a Zacks Rank #2 (Buy).
COSTCO WHOLE CP (COST): Free Stock Analysis
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