Costco profit tops estimates with sales bounce

chostaskldfBy Nicholas Heinzmann

Costco Wholesale Corp. started its new fiscal year with a strong showing, beating Wall Street estimates with a 17 percent jump in profit, thanks to lower gas prices and strong growth in membership fees.

For the fiscal first quarter ended Nov. 23, net income at the warehouse-club chain rose to $496 million, or $1.12 per diluted share, from $425 million, or 96 cents per diluted share, in the previous quarter. That topped by 3 cents the $1.09 analysts surveyed by Bloomberg had been expecting.

Revenues rose 7.4 percent to $26.9 billion compared with $25 billion last year. Revenue from membership fees, a key component of the retailer’s profitability, rose 6 percent to $582 million.

The Issaquah, Washington-based company’s performance is particularly notable compared with its competitors’ most recent sales results. At stores open more than a year, Costco’s sales rose 7 percent, excluding changes in gasoline prices and foreign exchange rates. That outshone retailers Wal-Mart and Target, at which such “comparable” U.S. store sales increased only 0.5 percent and 1.2 percent.

“These results are strong given that many peers are generating minimal growth,” Morningstar analyst Ken Perkins said in a research note. Perkins expects Costco will continue to grow traffic and keep costs low in the near future, and that “there are few material downside risks that can be identified at the moment.”

Costco released its latest solid profit performance on a day when the broad stock market was in a swoon.  In afternoon NASDAQ trading, the company’s shares were down $2.69 cents, or 1.85 percent, at $140.37.