Costco Wholesale Corporation, the second largest retailer in the U.S. after Walmart, posted fourth quarter and fiscal year results Wednesday that exceeded Wall Street expectations, helped by a strong Back-to-School season and an increase in new members, despite a rise in membership fees.
Net sales for the fourth quarter increased 9 percent to $34.75 billion, and for the fiscal year were up 7 percent to $110.21 billion.
Comparable sales grew by 6 percent for both the quarter and 4 percent for the fiscal year.
Gross margin expanded 15 basis points from 10.55 to 10.7%, helped by lower gasoline prices, though the margin for apparel and other soft goods product categories was flat.
Net income for the fourth quarter rose 13 percent to $697 million, or $1.58 per diluted share, compared to $617 million, or $1.40 per diluted share, last year. Net income for the fiscal year was $2.06 billion, or $4.65 per diluted share, compared to $2.04 billion, or $4.63 per diluted share, in fiscal year 2013. Net income last year was positively impacted by a $62 million ($.14 per diluted share) tax benefit in connection with the portion of the special cash dividend paid in December 2012 to the Company 401(k) plan participants.
Total sales for the month of September were $10.57 billion, an increase of 7 percent from the same period last year, while comps rose 4 percent.
Costco, considered by many to be among the best retailers in the country because of its operational excellence and concern for employees, is a warehouse club where members who pay an annual fee of $55 ($110 for an executive membership) can buy merchandise ranging from toilet paper to diamond rings at discounted prices. In fiscal 2013, approximately 11% of total sales was in the softlines area, which includes apparel, footwear, accessories and home products.
Membership income totaled $768 million in the fourth quarter, $52 million above the same quarter last year due to a net increase of 2 million new members, a 7 percent increase. Its U.S. membership renewal rate was 91 percent in the fourth quarter. The cavernous stores are over 143,000 sq feet in size, and tend to be located mostly in affluent suburbs where consumers have the disposable income to make large purposes.