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Costco closes the books on fiscal year with a profit drop

Issaqua, Wash. – Costco Wholesale Corp. posted profit declines during the fourth quarter and fiscal 2009 performance.

"Fiscal 2009 results, including those of the fourth quarter, were negatively impacted by these previously reported factors: on-going softness in U.S. sales, primarily the result of a weak economic environment; higher employee benefit costs, mainly consisting of higher health care eligibility and usage; and lower U.S. dollar amounts of international profits as a result of weaker foreign currencies,” said Richard Galanti, cfo during the company’s quarterly conference call today.

Net income for the fourth quarter ended Aug. 30 fell 6.0% to $374 million, or $.85 per share. Costco said earnings were boosted by a LIFO credit of $17 million, or 2 cents per share, after-tax.

Sales for the 16-week period slipped 3.0% to $21.89 billion. Comps for the quarter declined 6% in the U.S. and 3% internationally, and went down 5% for the total company. Excluding the negative impacts from gasoline deflation and foreign exchange (primarily in Canada, the United Kingdom and Korea), comps declined during the quarter 1% in the U.S., increased 7% internationally and rose by 1% for the total company.

For the full fiscal year, net income fell 14.8% to $1.09 billion, or $2.47 per share. The results included: a $32 million pretax LIFO credit, reversing the prior year's $32 million pretax LIFO charge; a $23 million pretax mark-to-market charge to the cash surrender value of some life insurance contracts; and a $34 million pretax third-quarter charge related to a litigation settlement concerning Costco’s membership renewal policy.

Sales for the 52-week fiscal period fell 2.0% to $69.89 billion. Comps declined 2% in the U.S. and 8% internationally and went down 4% for the total company. Excluding the negative impacts from gasoline deflation and foreign exchange, comps increased 1% in the United States, 7% internationally and 3% for the total company.

In other news, the 560-unit warehouse club – which operates 407 stores in the United States and Puerto Rico, 77 in Canada, 21 in the United Kingdom, seven in Korea, six in Taiwan, nine in Japan, 32 in Mexico and one in Australia – is planning on opening its first location in Manhattan.

This new site, set to host a grand opening event on Nov. 11, is the company’s third in New York City – the other two are in Queens’ Long Island City neighborhood and in Brooklyn.

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