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Costco Beats Earnings Forecast in Q1 2015

Leading warehouse retailer Costco Wholesale Corporation (COST) reported results for its first fiscal 2015 quarter ended Nov. 23, 2014.

Net sales rose 7 percent to $26.28 billion from $24.47 billion in the prior year first quarter. Comps rose by 6 percent in the U.S. and 1 percent for international stores, resulting in a corporate comparable sales gain of 5 percent, including the impacts from gasoline price declines and foreign currency fluctuations. Excluding the effects of these two factors, comps rose by 7 percent. Membership sales increased by 6 percent to $582 million, and the membership renewal rate ticked up slightly to an impressive 94.5%.

Softline sales, which include domestics, apparel and home furnishings, had a comparable sales increase in the mid-single-digits.

Gross margin improved by 22 basis points in the quarter to 11.03% of revenues.

Net income in the quarter was a better-than-expected $496 million, or $1.12 per diluted share, compared to $425 million, or $0.96 per diluted share, last year. Analysts expected a profit of $1.09 per share.

The company opened eight new units in the first fiscal quarter, including six in the U.S., one in Australia, and one in Mexico, bringing the total number of warehouses to 671, 474 of which are in the U.S. and Puerto Rico, 88 are in Canada, 34 are in Mexico, 26 are in the U.K, 41 are in Asia, seven in Australia, and one is in Spain. Costco has e-commerce sites in the U.S., Canada, the U.K. and Mexico, and plans to open another one sometime in 2015. Although no new store openings are planned for the second quarter, by the end of fiscal 2015 the company expects to have another 31 stores opened, 18 of which will be in the U.S.

Capital expenditures of $2.5 billion in the current fiscal year are planned at about $500 million higher than last year, and will cover IT investment, new store openings, and the investment in new depot space.