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Costco delivers strong Q4; to open nine U.S. clubs in Q1

Costco operates 855 warehouses around the world.
Costco currently operates 861 warehouses.

Costco Wholesale Corp. beat estimates for its top and bottom lines as rising store traffic helped make up for a decrease in its average transaction. 

Sales were impacted by weakness in spending on big-ticket items and discretionary purchases. But one high-ticket item is selling out fast: 24K gold bars.   On the company's earnings call, CFO Richard Galanti said that Costco has been selling one-ounce gold bars. The bars, which are only available online, are limited to two per member.

"When we load them on the site, they're typically gone within a few hours," he told analysts. 

The membership-based warehouse club retailer’s net income rose to to $2.16 billion, or $4.86 per share, for the 17-week quarter ended Sept. 3, compared with $1.87 billion, or $4.20 per share, in the 16-week year-ago quarter. Analysts on average expected earnings of $4.82 a share. 

Net revenue rose 9.5% to $78.94 billion in the period, topping analysts’ estimates of $77.9 billion. Membership fees rose 13.7% to $1.5 billion.  

Total comparable sales rose 1.1%, with only a 0.2% increase in the U.S. Comp sales in Canada rose 1.8%;  international comps rose 5.5%.  E-commerce comp sales fell 0.8%.

Adjusted for changes in gasoline prices and foreign currency, total company comparative sales increased 3.8% and U.S. comp sales rose 3.1%.

Costco’s average transaction fell 4.5% in the U.S., which the company attributed in part to  weakness in bigger ticket nonfood discretionary items and gas price deflation. Traffic rose 5.2% worldwide and 5% in the U.S. on a year-over-year basis. 

The company ended the quarter with 71 million paid household members, up 7.9% from a year ago. Regarding a rise in the membership fee, Galanti gave analysts on the earnings call his standard answer of “it’s a question of  when, not if.”  But he did not specify when it might take effect. (Costco hasn’t raised its membership fees in about six years.) 

“We can't really tell you if it's in our plans or not,” he said. “We'll let you know when we know.”

Also on the call, Galanti said Costco plans to open 10 new stores in the next three months, with nine in the U.S. and one in Canada.  During the fourth quarter, the company opened nine net new warehouses, including five new buildings in the U.S., two in China, and one each in Japan and Australia

For the full 53-week fiscal year, Costco’s net income totaled $6.292 billion, $14.16 per diluted share, compared to $5.844 billion, $13.14 per diluted share, in the 52-week prior year. Net sales for the full year increased 6.7% to $237.71 billion.

Costco currently operates 861 warehouses, including 591 in the United States and Puerto Rico, 107 in Canada, 40 in Mexico, 33 in Japan, 29 in the United Kingdom, 18 in Korea, 15 in Australia, 14 in Taiwan, five in China, four in Spain, two in France, and one each in Iceland, New Zealand and Sweden. Costco also operates e-commerce sites in the U.S., Canada, the U.K., Mexico, Korea, Taiwan, Japan and Australia.


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