Sales up, profits down at Costco

ISSAQUAH, WA — With costs climbing higher and margins trailing, third-quarter profits fell by 11.5 percent at Costco Wholesale Corp., to $105.3 million from $120.3 million last year, even though sales climbed at a double-digit pace.

Sales at the warehouse club operator advanced by 11.7 percent, to $7.6 billion from $6.7 billion. Same-store sales improved by an impressive 5 percent. Costco said revenues from membership fees shot up by 23.2 percent, to $155.4 million from $126.0 million.

However, average gross margin tightened by 30 basis points, to 9.8 percent from 10.1 percent a year ago. And expenses climbed by 40 basis points, to 9.3 percent from 8.9 percent. Despite the big improvement in sales, operating profits dropped by 12.1 percent, to $174.7 million from $198.7 million.

For the nine months year to date, profits were off by 4.6 percent, to $411.4 million from $431.3 million, even though sales moved up by 9.5 percent, to $23.2 billion from $21.2 billion, adding more than two billion dollars to the top line.