Costco just posted its best quarter ever, despite only adding 13 new locations in 2010 and of course, the recession. However, increased strength overseas and increased membership numbers aided Costco in growing their net income 16% in their fiscal fourth quarter.
Costco reported Wednesday that it earned $432 million, or 97 cents per share, for the period ended August 29; that represents an increase from $374 million, or 85 cents per share, a year ago. Analysts were estimating earnings of 95 centers per share, so Costco did ever so slightly better than expected there. For fiscal 2010, analysts were projecting revenue of $24.23 billion, so Costco didn’t quite pull that off with their actual revenue coming in at $24.13 billion. Though, that does mean that their revenue was up 8%, it still wasn’t enough to please Wall Street.
Making up just a quarter of all Costco location, international stores are really doing well with same store sales up a very healthy 14%. For those of you that aren’t familiar with economic-speak, ‘same store sales’ means ‘stores that have been open at least a year’. In any case, the same store sales in the US were up just 4% for Q4. Costco’s gross margin grew just 0.03 percent to 10.9 percent during the quarter, lower than some analysts had expected. Analysts and investors aren’t happy about this, but I’m sure as consumers don’t mind the lower prices so much.
The other factor in Costco’s earnings are their online stores at Costco.com and Costco.ca, which grew from $1.6 billion in sales for 2009 to $1.7 billion in 2010. CEO Jim Sinegal has said he thinks that eventually it could be a $5 billion business. I agree because I think they are leaving a lot of potential sales behind by not having online stores for their international locations (except for Canada). And, I love this quote regarding their online presence from Richard Galanti, CFO:
“It’s all about focus on merchandising. We’re not going to tweet. We’re not going to gift wrap.”
You’ll probably all be glad to hear that they expect to do some serious growing in the new fiscal year and build 29 new locations. Maybe there’s hope for everyone in Oklahoma City in 2011. Nine new locations will be opened in the first four months of fiscal 2011, which actually means before the end of this year because of how Costco’s fiscal years fall.
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