Membership warehouses operator Costco Wholesale Corp. (COST) reported Thursday a higher profit for the third quarter as sales increased in both the U.S. and international regions.
The results came a day after rating agency Fitch affirmed the company's rating, citing its strong competitive position, operating performance, low financial leverage and ample free cash flow and liquidity.
Costco's strategy with only 3,800 fast-turning products per warehouse and limited pricing mark-ups results in a loyal customer base and highly productive warehouses boosts its operating results, the rating agency noted.
Peer Target Corp. (TGT) last Wednesday reported a profit for the first quarter that beat analysts' expectations, as strong same-store sales growth helped offset lower earnings at its credit card segment. Target's retail sales were aided by unusually warm weather and an early Easter.
Retail giant Wal-Mart Stores, Inc. (WMT) last week reported a profit for the first quarter that increased 10 percent from last year, reflecting the continued strength overseas and rebounding U.S. sales.
Costco's third-quarter net income climbed 19 percent to $386 million or $0.88 per share from $324 million or $0.73 per share a year ago. The results included a pre-tax LIFO charge or $0.01 per share, much lower than $0.07 per share last year.
On average, 24 analysts polled by Thomson Reuters expected the company to earn $0.87 per share. Analysts' estimates typically exclude special items.
Net sales for the quarter increased 8.2 percent to $21.85 billion. Including higher membership fees, total revenue grew 8 percent to $22.32 billion from $20.62 billion a year earlier. Analysts expected revenues of $22.21 billion.
Comparable sales, or sales from warehouses in operation for at least one year, rose 5 percent, with both U.S. and international sales increasing 5 percent each. Inflation in gasoline prices had a positive impact on comparable sales, while foreign currencies had a negative impact.
Excluding these effects, comparable sales were up 5 percent, with 4 percent increase in US and 8 percent growth internationally.
Costco shares closed Wednesday's regular trading at $83.31, up $0.20 or 0.25 percent. In extended trading, the stock rose $0.19 or 0.23 percent to $83.50.
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