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Costco Comps Gain But Slip On Expenses

For the 12-week first quarter ended November 24, Costco Wholesale Corp. posted net income of $425 million, or 96 cents per diluted share, verses $416 million, or 95 cents per diluted share, in the period last year. Excluding the impact of gasoline price volatility and foreign exchange rates, comparable store sales advanced 4% in the United States, 6% internationally and 5% companywide, Costco stated.

Earnings per share missed a $1.02 Zacks Consensus Estimate based on an average financial analyst assessment. In a research note, Standard & Poors observed that technology investments, stock compensation expense and store opening outlays have constrained near-term margins.

Adjusted average transaction gained 1% in the quarter and frequency increased about 4.5%, Richard Galanti, Costco’s CFO said in a conference call. Net sales increased 5% from the prior-year period to $24.47 billion, the company reported.

As regards merchandise categories, Galanti said in the conference call that the retailer’s Softlines comps gained in the low double-digit range with small appliances, apparel and jewelry the strongest segments. Hardlines comps slipped slightly with auto and office performing well but consumer electronics trailing, while Fresh Food comps advanced in the mid single digits, he related. Costco earlier reported that Food and Sundries comps gained in the low to mid single digit range. In the United States, the Southeast, Midwest and Texas were the regions that performed best. E-commerce sales gained 24%.

Costco operates 648 warehouse clubs including 461 in the U.S. and Puerto Rico, 87 in Canada, 33 in Mexico, 25 in the United Kingdom, 18 in Japan, 10 in Taiwan, nine in Korea and five in Australia, according to the company. Costco also operates e-commerce web sites in the U.S., Canada, the U.K. and Mexico. The company opened 13 clubs in the first quarter, nine in the U.S., and closed one. The company has opened two clubs since the beginning of the second quarter. Store growth plans call for the company to open 30 new locations in the current fiscal year including 16 in the U.S. and two in Spain, Costco’s first clubs in that country.