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Costco Reports Lower Net Sales, Earnings

5/28/2009 09:40:00 AM Eastern

Issaquah, Wash. — Costco reported lower net sales and earnings for its fiscal third quarter, ended May 10.

Net sales for the third quarter of fiscal 2009 declined 5 percent, to $15.48 billion, from $16.26 billion during the third quarter of fiscal 2008.

Net income for the third quarter of fiscal 2009 was $209.6 million, compared with $295.1 million during the third quarter of fiscal 2008.

Comp-store sales in the U.S. during the quarter were down 5 percent and without gasoline deflation were flat with the same period last year.

Richard Galanti, chief financial officer of Costco, stated that "third-quarter 2009 earnings results were negatively impacted by several factors, including: a pretax charge of $34 million (mostly non-cash) related to a litigation settlement concerning our membership renewal policy; higher employee benefits costs, mainly consisting of higher health care usage; lower international profits, a result of the significant strengthening of the U.S. dollar when compared to the currencies of Canada, the United Kingdom, Korea and Mexico; and lastly, ongoing weakness in sales, particularly sales of higher-ticket, discretionary items."

Costco currently operates 555 warehouses, including 407 in the United States and Puerto Rico, 77 in Canada, 21 in the United Kingdom, six in Korea, five in Taiwan, eight in Japan and 31 in Mexico. It also operates e-commerce Web sites at www.costco.com and at www.costco.ca in Canada.

The company plans to open an additional six new warehouses prior to the end of its 2009 fiscal year on Aug. 30.