Costco 2Q earnings rise on overseas growth

AP News
Posted: Mar 02, 2011 6:45 PM
Costco 2Q earnings rise on overseas growth

Costco Wholesale Corp.'s fiscal second-quarter net income rose 16 percent as the wholesale club operator benefited from stronger business overseas and growing membership.

It extends Costco's run as one of the stronger retailers in the slow economy. Shoppers have flocked to its stores for deals on basics and more recently for housewares and other discretionary purchases.

Costco, based in Issaquah, Wash., on Wednesday reported net income of $348 million, or 79 cents per share, for the period ended Feb. 13. That's up from $299 million, or 67 cents per share, a year ago. The results met the expectations of analysts polled by FactSet.

Revenue climbed 11 percent to $20.88 billion, topping estimates of $20.4 billion.

Costco, which is the nation's largest wholesale club operator, said that sales at its stores open at least a year increased 7 percent. The figure rose 12 percent internationally and 5 percent in the U.S.

This metric is a key gauge of a retailer's health because it excludes stores that opened or closed during the year.

The company said it continued to see strong sales of food and other household basics. It also has seen improved sales of sporting, automotive and office goods. Electronics sales, such as computers, were softer, mirroring broader spending trends.

Costco said while it hasn't held all its prices static, it has resisted raising prices longer than its competitors as costs for many goods increase.

Food and consumer product makers have recently raised prices on a number of products as rising prices for oil, corn, grain and other key commodities have driven up their costs.

Costco Chief Financial Officer Richard Galanti said it has been able to secure today's prices on a number of product for an extended period as these increases are introduced. But he expects those pressures to increase in coming quarters.

Shares of Costco jumped in trading earlier in the day but dipped in afternoon trading, along with the rest of the market, on concerns about oil prices. Costco shares were down $1.86 to close at $71.76 Wednesday.


Sarah Skidmore contributed to this report from Portland, Ore. Michelle Chapman contributed to this report from New York.