Costco has same-store success

ISSAQUAH, WASH. — Helped by surging same-store sales, which climbed at a double-digit pace, Costco Warehouse Corp. drove third-quarter profits up almost a third, 29.2 percent, to $198.7 million from $153.8 million last year.

Sales at the multi-national operator of membership warehouse clubs rose 14.2 percent, to $10.7 billion from $9.3 billion. More importantly to the bottom line, same-store sales rocketed up 11 percent.

Overall sales would have climbed modestly higher, 16 percent in the third quarter and 15 percent for the nine months, but for a change in the way the retailer accounts for vendor allowances. The new accounting change reduces net sales and merchandise costs by an equal amount, but has no impact on margins or the bottom line.

Fueling the big earnings increase, in addition to the stronger same-store sales, Costco pushed interest and miscellaneous income up 54.6 percent, to $14.2 million from $9.2 million, dropping $5.1 million in extra cash straight to the bottom line.

Putting earnings under some pressure, average gross margin narrowed 120 basis points, or 1.2 percentage points, to 10.6 percent from 11.8 percent a year ago. Acting as a partial offset, operating costs were narrowed slightly, to 9.8 percent of sales from 9.9 percent a year ago.