COST
$177.52
Costco Wholesale
$.07
.04%
Earnings Details
2nd Quarter February 2017
Thursday, March 02, 2017 4:15:17 PM
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Summary

Costco Wholesale Misses

Costco Wholesale (COST) reported 2nd Quarter February 2017 earnings of $1.17 per share on revenue of $29.8 billion. The consensus earnings estimate was $1.35 per share on revenue of $29.9 billion. The Earnings Whisper number was $1.35 per share. Revenue grew 5.7% on a year-over-year basis.

Costco Wholesale Corp and its subsidiaries operate membership warehouses. It offers its members low prices on a limited selection of nationally branded and select private-label products in merchandise categories.

Results
Reported Earnings
$1.17
Earnings Whisper
$1.35
Consensus Estimate
$1.35
Reported Revenue
$29.77 Bil
Revenue Estimate
$29.94 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Costco Wholesale Corporation Reports Second Quarter and Year-to-Date Operating Results for Fiscal Year 2017, February Sales Results, and Plans for Membership Fee Increase

Costco Wholesale Corporation ("Costco" or the "Company") (COST) today announced its operating results for the second quarter (twelve weeks) and first half (24 weeks) of fiscal 2017, ended February 12, 2017.

Net sales for the quarter increased six percent, to $29.13 billion from $27.57 billion last year. Net sales for the first half increased four percent, to $56.60 billion from $54.19 billion last year.

Comparable sales for the twelve-week and twenty-four-week periods were as follows:

12 Weeks
24 Weeks
U.S.
3
%
2
%
Canada
8
%
6
%
Other International
-2
%
-1
%
Total Company
3
%
2
%

Comparable sales for these periods excluding the impacts from changes in gasoline prices and foreign exchange were as follows:

12 Weeks
24 Weeks
U.S.
3
%
2
%
Canada
2
%
3
%
Other International
3
%
3
%
Total Company
3
%
2
%

Net income for the quarter was $515 million, or $1.17 per diluted share, compared to $546 million, or $1.24 per diluted share, last year. Net income for the first half was $1.060 billion, or $2.41 per diluted share, compared to $1.026 billion, or $2.32 per diluted share, last year.

For the four-week reporting month of February, ended February 26, 2017, the Company reported net sales of $8.92 billion, an increase of eight percent from $8.28 billion during the similar four-week period last year. For the twenty-six week period ended February 26, 2017, net sales were $61.18 billion, an increase of five percent from $58.25 billion during the similar period last year.

Comparable sales for the four-week and twenty-six-week periods ended February 26, 2017 were as follows:

4 Weeks
26 Weeks
U.S.
5
%
3
%
Canada
10
%
6
%
Other International
-2
%
-1
%
Total Company
4
%
3
%

Comparable sales for these periods excluding the impacts from changes in gasoline prices and foreign exchange were as follows:

4 Weeks
26 Weeks
U.S.
2
%
2
%
Canada
2
%
3
%
Other International
-1
%
3
%
Total Company
2
%
2
%

The Company also announced that, effective June 1, 2017, it will increase annual membership fees by $5 for U.S. and Canada Goldstar (individual), Business, and Business add-on members ("Primary" Members). With this increase, all U.S. and Canada Goldstar, Business and Business add-on members will pay an annual fee of $60. Also effective June 1, annual fees for Executive Memberships in the U.S. and Canada will increase from $110 to $120 (Primary membership of $60, plus the Executive upgrade of $60), and the maximum annual 2% reward associated with the Executive Membership will increase from $750 to $1,000. The fee increases will impact around 35 million members, roughly half of them Executive Members.

Costco currently operates 728 warehouses, including 508 in the United States and Puerto Rico, 94 in Canada, 37 in Mexico, 28 in the United Kingdom, 25 in Japan, 13 in Korea, 13 in Taiwan, eight in Australia and two in Spain. Costco also operates electronic commerce web sites in the U.S., Canada, the United Kingdom, Mexico, Korea and Taiwan.

A conference call to discuss these fiscal 2017 second quarter operating results and February sales results is scheduled for 2:00 p.m. (PT) on March 2, 2017, and is available via a webcast on www.costco.com (click on Investor Relations and "Play Webcast").

Certain statements contained in this document constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For these purposes, forward-looking statements are statements that address activities, events, conditions or developments that the Company expects or anticipates may occur in the future. Such forward-looking statements involve risks and uncertainties that may cause actual events, results or performance to differ materially from those indicated by such statements. These risks and uncertainties include, but are not limited to, domestic and international economic conditions, including exchange rates, the effects of competition and regulation, uncertainties in the financial markets, consumer and small business spending patterns and debt levels, breaches of security or privacy of member or business information, conditions affecting the acquisition, development, ownership or use of real estate, capital spending, actions of vendors, rising costs associated with employees (including health care costs), energy and certain commodities, geopolitical conditions, and other risks identified from time to time in the Company’s public statements and reports filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made, and we do not undertake to update these statements, except as required by law.

COSTCO WHOLESALE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in millions, except per share data)
(unaudited)
12 Weeks Ended
24 Weeks Ended
February 12,
February 14,
February 12,
February 14,
2017
2016
2017
2016
REVENUE
Net sales
$
29,130
$
27,567
$
56,599
$
54,194
Membership fees
636
603
1,266
1,196
Total revenue
29,766
28,170
57,865
55,390
OPERATING EXPENSES
Merchandise costs
25,927
24,469
50,215
48,090
Selling, general and administrative
2,980
2,835
5,920
5,641
Preopening expenses
15
10
37
36
Operating income
844
856
1,693
1,623
OTHER INCOME (EXPENSE)
Interest expense
(31
)
(31
)
(60
)
(64
)
Interest income and other, net
(4
)
16
22
44
INCOME BEFORE INCOME TAXES
809
841
1,655
1,603
Provision for income taxes
288
286
579
561
Net income including noncontrolling interests
521
555
1,076
1,042
Net income attributable to noncontrolling interests
(6
)
(9
)
(16
)
(16
)
NET INCOME ATTRIBUTABLE TO COSTCO
$
515
$
546
$
1,060
$
1,026
NET INCOME PER COMMON SHARE
ATTRIBUTABLE TO COSTCO:
Basic
$
1.17
$
1.24
$
2.42
$
2.34
Diluted
$
1.17
$
1.24
$
2.41
$
2.32
Shares used in calculation: (000’s)
Basic
439,127
439,648
438,567
438,990
Diluted
440,657
441,559
440,568
441,457
Cash dividends declared per common share
$
0.45
$
0.40
$
0.90
$
0.80
COSTCO WHOLESALE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in millions, except par value and share data)
(unaudited)
Subject to Reclassifications
February 12,
August 28,
2017
2016
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
4,744
$
3,379
Short-term investments
1,221
1,350
Receivables, net
1,597
1,252
Merchandise inventories
9,530
8,969
Other current assets
368
268
Total current assets
17,460
15,218
PROPERTY AND EQUIPMENT
Land
5,436
5,395
Buildings and improvements
14,395
13,994
Equipment and fixtures
6,363
6,077
Construction in progress
697
701
26,891
26,167
Less accumulated depreciation and amortization
(9,549
)
(9,124
)
Net property and equipment
17,342
17,043
OTHER ASSETS
828
902
TOTAL ASSETS
$
35,630
$
33,163
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable
$
8,764
$
7,612
Current portion of long-term debt
2,257
1,100
Accrued salaries and benefits
2,780
2,629
Accrued member rewards
910
869
Deferred membership fees
1,458
1,362
Other current liabilities
2,691
2,003
Total current liabilities
18,860
15,575
LONG-TERM DEBT, excluding current portion
2,815
4,061
OTHER LIABILITIES
1,243
1,195
Total liabilities
22,918
20,831
COMMITMENTS AND CONTINGENCIES
EQUITY
Preferred stock $.005 par value; 100,000,000 shares authorized; no shares issued and outstanding
0
0
Common stock $.005 par value; 900,000,000 shares authorized; 438,941,000 and 437,524,000 shares issued and outstanding 2
2
Additional paid-in capital
5,631
5,490
Accumulated other comprehensive loss
(1,333
)
(1,099
)
Retained earnings
8,140
7,686
Total Costco stockholders’ equity
12,440
12,079
Noncontrolling interests
272
253
Total equity
12,712
12,332
TOTAL LIABILITIES AND EQUITY
$
35,630
$
33,163
Costco Wholesale Corporation
Richard Galanti, 425/313-8203
Bob Nelson, 425/313-8255
David Sherwood, 425/313-8239

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