Costco Sees Bulky Net Income Rise
It was revealed on Thursday that Costco's (NASDAQ: COST) fiscal third quarter net income shot up 19% on lower asset charges, as the buy-in-bulk wholesale store saw money come in from membership fees.
The numbers certainly make for nice reading for COST executives, with the company posting earnings of $386 million, or 88 cents per share, for the period ending May 6. Compare that to the previous year's numbers of $324 million, or 73 cents per share.
The membership fee factor is interesting. Customers at Costco have to buy an annual membership, the idea being that the cost of the membership ($55) will be more-then made back through savings by buying items in bulk. If there is a certain time of year when more memberships are up for renewal than usual, like the beginning of the calendar year, for example, then Costco's numbers for that quarter will look particularly good. That seems to be what happened here.
That isn't all though. Revenue went up 8% to $22.32 billion, from $20.62 billion last year. That tops the Wall Street estimate of $22.11 billion. It is important to note, however, that revenue at stores that have been open and active for one year minimum increased 5%, which is a key detail because it excludes revenue from stores recently opened, which can be inflated as local customers become excited early on by the new store.
Costco has said that it is planning to open six new warehouses before the end of the current fiscal year, adding to the 602 that it already has, including 435 in the U.S. and Puerto Rico, 82 in Canada, 32 in Mexico, 22 in the UK, 13 in Japan, eight ion Taiwan, seven in Korea and three in Australia.
Costco's brand is incredibly strong in the U.S., with Sam's Club the closest real competitor. Consumers seem to like the idea of buying certain non-perishable items in bulk, like toilet paper, cleaning supplies and some frozen goods, even in difficult times, making significant long-term savings in the process.
It is also important to note that the last quarter included the tax refund period, when consumers might be more likely to stock up on the aforementioned items.
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