Costco earnings up 25 percent

By Staff -- Home Textiles Today, 3/8/2004 12:00:00 AM

ISSAQUAH, WASH. —

Lifted by stronger sales and interest income, and getting a further boost from a drop in store-closing costs, Costco Wholesale Corp. said earnings jumped by 24.6 percent, to $226.8 million from $182.1 million, during its second fiscal quarter ended Feb. 15.

Sales at the no-frills pioneer rose by 14.2 percent, to $11.3 billion from $9.9 billion, helped by a California grocery store strike that sent shoppers through its doors looking for staple food items.

With its core business continuing to surge as cost-conscious consumers sniff out bargains, same-store sales climbed by 11 percent for both the second quarter and the first six months of the retailer's fiscal year.

Providing a lift to the bottom line, Costco improved its interest and miscellaneous income by 45.5 percent, to $13.1 million from $9 million last year.

At the same time, the company whittled down by a third a provision for impaired assets and store closing costs, to $3 million from $4.5 million.

The company also put behind it an after-tax charge of $16 million, or three cents per share, that dogged the bottom line last year as the company increased its workers' compensation loss reserves.

Average gross margin and operating costs both improved modestly during the second quarter. Average gross margin improved by 10 basis points, or one-tenth of a percentage point, to 10.8 percent from 10.9 percent a year ago.

Operating costs were shaved by a like amount, declining by 10 basis points, or one-tenth of a percentage point, to 9.6 percent of sales from 9.7 percent a year ago.

With the improvement in the two key operating metrics, and the solid advance in sales, operating profits shot up by 27.3 percent, to $143.6 million from $112.9 million the preceding year.

Costco Wholesale Corp.