Costco Q1 buoyed by grocery strike

Don Hogsett, Staff Staff, December 15, 2003

Helped by a California grocery strike, which drove customers in its doors, as well as strong sales of big-ticket electronics, first quarter sales at Costco Wholesale Corp. jumped 14.4 percent, to $10.3 billion from $9 billion last year.

Membership fees and other revenues brought in another $211.7 million, up 12.6 percent from $188 million last year.

A crucial gauge, same-store sales, shot up 11 percent, the warehouse retailer reported.

In a conference call with analysts and investors, Richard Galanti, cfo, said the grocery strike in California provided a big lift to Costco sales during the quarter, boosting same-store sales as much as a full percentage point. Strong comps were also recorded in the Northeast, Midwest and international divisions. International results were also helped by favorable currency exchange rates.

In addition to stronger grocery sales, top-line growth was also fueled by brisk sales of consumer electronics, including big-screen televisions and digital cameras.

With costs climbing higher and margins thinning out, profits, while strong, couldn't keep up with sales growth, and rose at a somewhat slower pace of 9.9 percent, to $160.2 million from $145.7 million last year.

Operating profits grew at an even more sluggish pace, edging up by 3.1 percent, to $268.9 million from $260.9 million a year ago.

Acting as a drag on the bottom line, average gross margin — historically thin in the warehouse club channel, leaving scant room for erosion — thinned by 10 basis points, or one-tenth of a percentage point, to 10.6 percent from 10.7 percent the preceding year.

At the same time, costs edged upwards by 10 basis points, or a tenth of a percentage point, to 10.0 percent from 9.9 percent last year.

Lending strength to the bottom line, the retailer slashed its store pre-opening costs by 44.3 percent during the period, to $10.1 million from $18.1 million last year, generating a savings of $8.0 million.

Costco Wholesale Corp.

Qtr. 11/23 (x000) 2003 2002 % chg
a-Net retail sales, excluding membership fees and other revenues of $211.7 million, up 12.6 percent from $188.0 million a year ago. First-fiscal quarter results include $7.9 million in interest and miscellaneous income, up 3.5 percent from $7.6 million last year;$10.1 million in pre-opening expenses, down 44.3 percent from $18.1 million last year; and a $4.0 million provision for impaired assets and closing costs, down 20.0 percent from $5.0 million last year.
Sales $10,309,822a $9,010,571a 14.4
Oper. income (EBIT) 268,943 260,909 3.1
Net income 160,175b 145,729b 9.9
Per share (diluted) 0.34 0.31 9.7
Average gross margin 10.6% 10.7%
SG&A expenses 10.0% 9.9%

Featured Video

  • The Countdown to the ICON Honors Continues featuring Christophe Pourny

    Camera Icon More Videos


HTT digital edition

See the May 2017 issue of Home & Textiles Today. In this issue, we discuss our annual Market Basket survey, which finds higher prices and more polyester at leading retailers. See details!