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Rising sales boost Costco profits

ISSAQUAH, Wash. — Helped by a double-digit gain in sales, first fiscal quarter profits at Costco Wholesale Corp. shot up 20.6 percent, to $193.2 million from $160.2 million a year ago.

Sales climbed 10 percent, to $11.3 billion from $10.3 billion last year, and same-store sales advanced 7 percent. Sales would have risen even higher, but were capped by a change in the way the retailer accounts for vendor coupons and rebates. Excluding the accounting change, overall sales would have climbed 11 percent and same-store sales 8 percent. The change had no impact on gross profit or net income.

Wall Street took a dim view of the lower sales volumes engendered by the accounting change and pushed Costco stock down 2 percent, or $1 a share, to $47.90, in the hours after the news came out today.

Margins and costs both held steady during the opening quarter, margins unchanged at 8.9 percent, and costs unchanged at 10 percent of sales.

In a lift to the bottom line, the retailer added $15.6 million in interest and miscellaneous income, almost double the $7.9 million recorded the prior year. The interest income more than offset interest expense, which climbed 13.8 percent, to $9.6 million from $8.5 million.

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