Costco profit falls 3.2% in Q4
October 13, 2003,
With margins under pressure, costs climbing higher and facing fresh competition as rival Sam's Club shows signs of renewed strength, Costco Wholesale Corp. said fourth-quarter profits slipped by 3.2 percent, to $239.4 million from $247.4 million last year.
Putting pressure on the bottom line, average gross margin thinned modestly, by ten basis points, or one-tenth of a percentage point, to 10.7 percent from 10.8 percent last year. At the same time, costs edged up by 30 basis points, or three-tenths of a percentage point, to 9.8 percent of sales from 9.5 percent the prior year.
Pressured by the rising costs and margin erosion, operating profits tumbled by 28.3 percent, to $110.8 million from $154.6 million last year.
Siphoning off more cash from the bottom line, interest expense, while still modest, jumped up by 46.4 percent, to $11.7 million from $8.0 million a year ago. But more than offsetting higher interest costs, interest income and miscellaneous income totaled $12.7 million, up 13.5 percent from $11.2 million last year.
Acting as a drag was a $4.0 million charge for asset impairment and store closing costs, down from $5 million during the same period a year ago.
For all of last year, Costco profits edged up by 3.0 percent, to $721 million from $700 million in 2002. Sales advanced by 9.7 percent, to $41.7 million from $38.0 million. Same-store sales for the 12-month period increased by 5 percent.
Costco Wholesale Corp.
|Qtr. 8/31 (x000)||2003||2002||% change|
|a-Net sales, excluding membership fees and other revenues. Total sales during the fourth quarter were $13.7 billion, up 11.3 percent from $12.3 billion last year. For the full year, total sales rose by 9.8 percent, to $42.5 billion from $38.8 billion in 2002.
b-Fourth-quarter results include $5.5 million in pre-opening expenses, down 61.7 percent from $14.4 million last year; a $4 million provision for impaired assets and store closing costs, down from $5 million last year; and miscellaneous income of $12.7 million vs. $11.2 million a year ago. Full-year results include$36.6 million in pre-opening costs, compared with $51.3 million a year ago; a $19.5 million provision for asset impairment and store closing costs, compared with $21.1 million last year; and miscellaneous income of $38.5 million vs. $35.7 million last year.
|Oper. income (EBIT)||110,834||154,558||-28.3|
|Per share (diluted)||0.51||0.52||-1.9|
|Average gross margin||10.7%||10.8%||—|
|Oper. income (EBIT)||359,918||434,436||-17.2|
|Per share (diluted)||1.53||1.48||3.4|
|Average gross margin||10.7%||10.6%||—|