COST
Costco Wholesale
$231.34
$.32
.14%
Costco Wholesale Corporation Reports Fourth Quarter and Fiscal Year 2018 Operating Results
Thursday, October 4, 2018  4:15:00 PM ET

ISSAQUAH, Wash., Oct. 04, 2018 (GLOBE NEWSWIRE) -- Costco Wholesale Corporation (“Costco” or the “Company”) (Nasdaq: COST) today announced its operating results for the 16-week fourth quarter and the 52-week fiscal year ended September 2, 2018.

Net sales for the 16-week fourth quarter were $43.4 billion, an increase of 5.0 percent from $41.4 billion in the 17-week fourth quarter last year. Net sales for the 52-week fiscal year were $138.4 billion, an increase of 9.7 percent from $126.2 billion in the 53-week fiscal year of 2017.

Comparable sales for the 16-week fourth quarter, and the 52-week fiscal year were as follows:

      
   16 Weeks 52 Weeks
      
 U.S. 10.8% 9.4%
 Canada 5.7% 8.9%
 Other International 6.7% 10.8%
      
 Total Company 9.5% 9.5%
      
 E-commerce 26.2% 32.2%
      

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

      
   16 Weeks 52 Weeks
      
 U.S. 7.8% 7.4%
 Canada 4.6% 4.1%
 Other International 6.9% 7.1%
      
 Total Company 7.2% 6.8%
      
 E-commerce 26.3% 31.3%
      

Net income for the 16-week fourth quarter was $1,043 million, or $2.36 per diluted share, compared to $919 million, or $2.08 per diluted share, in the 17-week fourth quarter last year.

Net income for the 52-week fiscal year was $3.13 billion, or $7.09 per diluted share, compared to $2.68 billion, or $6.08 per diluted share, in the 53-week prior year. Net income this year was positively impacted by a $41 million ($0.09 per diluted share) tax benefit in the first quarter, related to a change in accounting rules for stock-based compensation. Last year’s net income was positively impacted by an $82 million ($0.19 per diluted share) tax benefit in connection with the third-quarter special cash dividend and other net benefits of approximately $51 million ($0.07 per diluted share after tax) for nonrecurring legal and other matters.

While the Company is still completing its assessment of the effectiveness of its internal control over financial reporting as of September 2, 2018, in its upcoming fiscal 2018 Annual Report on Form 10-K, it expects to report a material weakness in internal control. The weakness relates to general information technology controls in the areas of user access and program change-management over certain information technology systems that support the Company’s financial reporting processes. The access issues relate to the extent of privileges afforded users authorized to access company systems. As of the date of this release, there have been no misstatements identified in the financial statements as a result of these deficiencies, and the Company expects to timely file its Form 10-K.

Remediation efforts have begun; the material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. The Company expects that the remediation of this material weakness will be completed prior to the end of fiscal year 2019.

Costco ended its 2018 fiscal year with 762 warehouses in operation, including 527 in the United States and Puerto Rico, 100 in Canada, 39 in Mexico, 28 in the United Kingdom, 26 in Japan, 15 in Korea, 13 in Taiwan, 10 in Australia, two in Spain, one in France and one in Iceland. Costco also operates e-commerce web sites in the U.S., Canada, the United Kingdom, Mexico, Korea and Taiwan.

A conference call to discuss these fiscal 2018 fourth quarter and year-end operating results is scheduled for 2:00 p.m. (PT) today, October 4, 2018, 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. In some cases forward-looking statements can be identified because they contain words such as “anticipate,”  “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “likely,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or similar expressions and the negatives of those terms. 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 (generally including health care costs), energy and certain commodities, geopolitical conditions (including tariffs), the ability to remediate material weaknesses in internal control, 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 the Company does not undertake to update these statements, except as required by law.

CONTACTS:
Costco Wholesale Corporation

Richard Galanti, 425/313-8203
Bob Nelson, 425/313-8255
David Sherwood, 425/313-8239

COSTCO WHOLESALE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
 (amounts in millions, except per value and share data)
(unaudited)

        
 16 Weeks Ended 17 Weeks Ended 52 Weeks Ended 53 Weeks Ended
 September 2,
2018
 September 3,
2017
 September 2,
2018
 September 3,
2017
REVENUE       
Net sales$43,414  $41,357  $138,434  $126,172 
Membership fees997  943  3,142  2,853 
Total revenue44,411  42,300  141,576  129,025 
OPERATING EXPENSES       
Merchandise costs38,671  36,697  123,152  111,882 
Selling, general and administrative4,263  4,123  13,876  12,950 
Preopening expenses31  30  68  82 
Operating income1,446  1,450  4,480  4,111 
OTHER INCOME (EXPENSE)       
Interest expense(48) (53) (159) (134)
Interest income and other, net51  22  121  62 
INCOME BEFORE INCOME TAXES1,449  1,419  4,442  4,039 
Provision for income taxes396  487  1,263  1,325 
Net income including noncontrolling interests1,053  932  3,179  2,714 
Net income attributable to noncontrolling interests(10) (13) (45) (35)
NET INCOME ATTRIBUTABLE TO COSTCO$1,043  $919  $3,134  $2,679 
        
NET INCOME PER COMMON SHARE
  ATTRIBUTABLE TO COSTCO:
       
Basic$2.38  $2.10  $7.15  $6.11 
Diluted$2.36  $2.08  $7.09  $6.08 
        
Shares used in calculation (000’s):       
Basic438,379  437,987  438,515  438,437 
Diluted442,427  441,036  441,834  440,937 
        
        
CASH DIVIDENDS DECLARED PER COMMON
  SHARE
$0.57  $0.50  $2.14  $8.90 
                


COSTCO WHOLESALE CORPORATION

CONSOLIDATED BALANCE SHEETS
 (amounts in millions, except par value and share data)
(unaudited)

     Subject to Reclassification

      
   September 2,
2018
 September 3,
2017
ASSETS   
CURRENT ASSETS   
Cash and cash equivalents$6,055  $4,546 
Short-term investments1,204  1,233 
Receivables, net1,669  1,432 
Merchandise inventories11,040  9,834 
Other current assets321  272 
Total current assets20,289  17,317 
PROPERTY AND EQUIPMENT   
Land6,193  5,690 
Buildings and improvements16,107  15,127 
Equipment and fixtures7,274  6,681 
Construction in progress1,140  843 
 30,714  28,341 
Less accumulated depreciation and amortization(11,033) (10,180)
Net property and equipment19,681  18,161 
OTHER ASSETS860  869 
TOTAL ASSETS$40,830  $36,347 
LIABILITIES AND EQUITY   
CURRENT LIABILITIES   
Accounts payable$11,237  $9,608 
Accrued salaries and benefits2,994  2,703 
Accrued member rewards1,057  961 
Deferred membership fees1,624  1,498 
Other current liabilities3,014  2,725 
Total current liabilities19,926  17,495 
LONG-TERM DEBT, excluding current portion6,487  6,573 
OTHER LIABILITIES1,314  1,200 
Total liabilities27,727  25,268 
COMMITMENTS AND CONTINGENCIES   
EQUITY   
Preferred stock $0.01 par value; 100,000,000 shares authorized; no shares
    issued and outstanding
   
Common stock $0.01 par value; 900,000,000 shares authorized;
    438,189,000 and 437,204,000 shares issued and outstanding
4  4 
Additional paid-in capital6,107  5,800 
Accumulated other comprehensive loss(1,199) (1,014)
Retained earnings7,887  5,988 
Total Costco stockholders’ equity12,799  10,778 
Noncontrolling interests304  301 
Total equity13,103  11,079 
TOTAL LIABILITIES AND EQUITY$40,830  $36,347 
        

Source: Costco Wholesale Corporation