Costco Sales Jump 10%, Net Rises 20% In Q4
By Jeff Malester -- TWICE, 10/10/2005
Issaquah, Wash. — Fiscal fourth-quarter sales at warehouse club retailer Costco Wholesale increased 10 percent, hitting $16.4 billion, up from a year-ago $14.8 billion. Comparable warehouse sales climbed 7 percent in the three months, ended Aug. 28.
With expenses rising during the fourth quarter, Costco reported operating income of $467.6 million, about flat with the $465.5 million recorded in the same period last year.
However, net income increased nearly 20 percent, to $354.7 million, compared with $296.8 million in the same quarter in 2004.
Net income during the quarter was positively impacted by lower income tax expense, reflecting a tax benefit recorded with respect to un-remitted earnings and lower state tax expense, resulting in a tax rate of 28.9 percent for the quarter, compared with 37 percent year-on-year. Excluding these items, Costco estimates its “normalized” fourth-quarter tax rate would have been 35.8 percent, and net income would have been $320.2 million.
Net sales for the warehouse club's fiscal year reached $51.9 billion, also a 10 percent rise over the previous year's $47.1 billion. Comparable warehouse sales for the 12 months also increased 7 percent.
Operating income for the fiscal year climbed to $1.5 billion, up from $1.4 billion the previous fiscal year.
Net income for the 12 months rose 25 percent, to $1.1 billion, up from $882.4 million year-over-year.
Net income for the fiscal year was impacted by two non-recurring items previously reported concerning the second quarter — a $52.1 million income tax benefit and a cumulative pretax, non-cash charge to pre-opening expenses of $16 million. Exclusive of these items and the tax benefit, net income for the fiscal 12 months would have been $998.3 million.
Costco also announced it has authorized an additional stock repurchase program of up to $1 billion on its common stock. This is in addition to the previously approved $500 million stock repurchase program, under which about $413 million has been expended to date. The retailer had repurchased 9.1 million shares of stock at an average cost of $44.87 per share.
Under these programs, the retailer may repurchase shares at any time in the open market or in private transactions as market conditions warrant. The company expects to fund stock purchases from cash and cash equivalents, as well as short-term investments on hand.
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