Earnings for the quarter were up, but 12-month profit was down from the previous fiscal year. Revenue for the year rose, but worldwide sales in stores open at least a year were flat.
Costco Wholesale, which Thursday reported fourth-quarter and fiscal year earnings that beat Wall Street forecasts, said its recent switch from longtime partner American Express to Citigroup and Visa is exceeding the company’s expectations despite a rocky start.
The switch, which took place June 20, meant the warehouse giant went from accepting only American Express credit cards to accepting only Visa credit cards in all its U.S. locations.
Citi became the exclusive issuer of Costco’s co-branded credit cards, which also serve as Costco membership cards.
The transition of millions of members to the new Costco Anywhere Visa Card by Citi did not go smoothly, as people reported not receiving their new Visa cards in time for the switch, or having trouble getting online access or connecting with customer service at Citi.
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However, contended Costco Chief Financial Officer Richard Galanti during the quarterly conference call with analysts Thursday, “We’re now past that.”
Galanti said about 11.4 million American Express co-branded cards, representing just under 7.5 million accounts, were transferred to Citi. And 1.1 million members have applied for the new card, with more than 730,000 new accounts activated.
“So far, we’re beating our initial expectations in terms of conversion, usage and new sign-ups to the card,” he said.
Galanti didn’t have much to say on another item on the minds of some Costco members: a likely membership-fee increase.
He had said in March the warehouse club was considering hiking membership fees in the U.S. and Canada — something it does every five to six years. The last time there was a fee increase was in January 2012.
“When we look at our member loyalty, the impact that previous increases had on renewal rates — it’s really a nonissue,” Galanti said. “We haven’t made any decisions yet.”
Annual Costco membership fees, which start at $55, contribute significantly to the company’s bottom line. For instance, in the fourth quarter, membership fees brought in $832 million — more than Costco’s total profit of $779 million.
The company did increase its membership fee this month by about 10 percent in Taiwan, Korea, Japan, Mexico and the United Kingdom.
A $1.50 hike in the minimum wage Costco pays entry-level employees, which the company instituted in March, contributed to a 5.6 percent increase in its selling, general and administrative expenses for the quarter ended Aug. 28.
Overall, the Issaquah-based warehouse club reported quarterly profit of $779 million, or $1.77 per diluted share, up from $767 million, or $1.73 per diluted share, last year. Analysts had expected earnings per share of $1.73, according to a Reuters average consensus estimate.
For the fiscal year, Costco saw profit of $2.35 billion, or $5.33 per diluted share, down from $2.38 billion, or $5.37 per diluted share, last year. Analysts polled by Reuters had expected fiscal-year earnings of $5.29.
Overall revenue for the company went up for the quarter and the fiscal year.
The company reported total revenue (including sales and membership fees) of $36.56 billion for the quarter, up from $35.78 billion last year. The revenue figure came in slightly below analysts’ expectations of $36.83 billion.
Excluding membership fees, the company logged sales of $35.73 billion.
For the fiscal year, Costco reported revenue of $118.72 billion, up from $116.2 billion last year. That figure also came in below analysts’ estimates of $119.15 billion.
Excluding membership fees, Costco logged sales of $116.07 billion for the year.
Sales in stores open at least a year were flat worldwide for both the quarter and the year. Sales in U.S. stores open at least a year declined 1 percent in the quarter, while rising 1 percent for the fiscal year.
Excluding the negative impacts from gas-price decreases and foreign-exchange fluctuations, though, comparable sales companywide grew 3 percent in the quarter and 4 percent for the full fiscal year.
In the U.S., such sales rose 2 percent for the quarter, and 3 percent for the year.
Costco shares were up 1.7 percent in after-hours trading to $150.