Costco readies expansion ahead of holidays

A strong dollar and tumbling gas prices made Costco’s fourth quarter sales results seem weak. They weren’t and now the company plans to open 12 more clubs before year end.



The 12 openings are part of the company’s expansion plan for its 2016 fiscal year which began on Aug. 31. The company’s most recent fiscal year ended with a net increase of 23 warehouses which brought the worldwide total to 686 locations. During the current fiscal year, expansion will accelerate as Costco plans to spend between $2.8 billion and $3 billion, versus $2.4 billion last year, to add a total of 32 net new warehouses. Between 18 and 20 of those locations will be in the U.S. The accelerated pace of expansion comes as Costco enjoys record 91% membership renewal rate in the U.S. and Canada and 88% worldwide, giving the company confidence to plan annual openings of around 30 units for the next five years.



Costco said total sales for its fourth quarter ended Aug. 30 increased 1% to $35 billion and same-store sales declined 1%. Strip out the negative effects of a strengthening dollar and gas prices that were 21% lower during Costco’s fourth quarter when compared to the prior year and total company and U.S. same-store sales increased 6%.



Aided by membership growth, net income during the quarter increased 10% to $767 million from $697 million. Earnings per share increased 9.5% to $1.73 from $1.58 which was considerably better than analysts’ consensus estimate of $1.66. Membership income during the period increased 2.2% to $785 million.



For the full year, Costco’s sales increased 3% to $113.7 billion from $110.2 billion the prior year. Full year net income grew increased to $2.38 billion, or $5.37 per share, compared to $2.06 billion, or $4.65 per share, last year. Full year membership income increased 4.3% to $2.5 billion.



E-commerce sales growth also remained strong with sales advancing slightly more than 20% to total $3.5 billion for the year.



Costco ended the year with 686 warehouses worldwide, including 480 in the United States and Puerto Rico, 89 in Canada, 36 in Mexico, 27 in the United Kingdom, 23 in Japan, 12 in Korea, 11 in Taiwan, seven in Australia and one in Spain. The company said it plans to open 12 more locations before the end of the calendar year.