Costco's first-quarter profit rose 11. 7 percent, helped by sales of gasoline and electronics.
Costco’s first-quarter profit rose 11.7 percent, helped by sales of gasoline and electronics.
The Issaquah-based warehouse-club retailer said Thursday that its profit climbed to $215.8 million, or 45 cents a share, from $193.2 million, or 40 cents, a year earlier. Revenue rose 11.7 percent to $12.9 billion.
Still, the company’s stock fell $1.06, or 2.1 percent, to $48.29 Thursday because the company’s profit failed to exceed the highest analyst estimates and the company’s gross margin narrowed. Twenty-three analysts surveyed by Thomson Financial estimated profit of 45 cents a share.
Comparable-store sales — sales at stores open at least a year — rose 9 percent, exceeding the 8.1 percent gain of Wal-Mart Stores’ Sam’s Club, as Costco emphasized upscale electronics including flat-screen televisions and computers. Costco also benefited by selling fuel for less than competitors.
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“They had a nice, solid quarter,” said Patricia Edwards, who helps manage $6.4 billion at Wentworth, Hauser & Violich in Seattle, including Costco shares. “They make more money when gas prices are falling.”
Costco carries less than a day’s supply of gasoline, making it more vulnerable to wholesale price increases, according to Chief Executive Jim Sinegal. Costco keeps retail prices at or below those offered by local gasoline stations to bring customers to its warehouses, Sinegal said.
The company said first-quarter results include a pretax cost of $7.6 million, or 1 cent per share, related to damage from Hurricane Wilma in Florida. Last year’s fiscal first quarter also included a 1-cent charge for hurricanes.
Gross margin, or the percentage of sales left after subtracting the cost of goods sold, narrowed to 10.54 percent from 10.65 percent, in part because of a company cash-back rewards program.
Selling, general and administrative costs fell to 9.94 percent of sales from 9.98 percent a year earlier, the company said Thursday. Membership fees increased 10 percent to $262.6 million.
Sam’s Club, which like Costco sells discounted groceries, office products and appliances, said in October it will raise annual membership fees for the first time in seven years and use the revenue to cut prices.
The $5 increase, effective Jan. 1, will raise business membership to $35 and basic membership to $40. BJ’s Wholesale Club also plans to raise its membership fees by $5 on Jan. 1, to $45 and $80.
Costco charges $45 for a new basic or business-level membership and $100 for a new executive-level membership. Costco won’t immediately increase its fee, Chief Financial Officer Richard Galanti said Thursday on a conference call with analysts.
“I think personally our competitors have been waiting for us to do something and got tired of waiting,” Galanti said. “We at some point will change it, but it’s not necessarily going to be Jan. 1 or Jan. 2. It’s not necessarily going to be at the end of the year either. We haven’t made any plans yet.”
Costco has previously raised the prospect of increasing fees early next year when restrictions in California, its largest market, are lifted.