Costco Profit Soars Beyond Expectations

Costco Wholesale’s profit has soared for the company’s second quarter beyond expectations. The company’s net income climbed by 39 percent from membership fees, sales, and a large tax benefit.

Costco reported earnings of $547 million, or $1.24 per share for the quarter that ended on February 17. The numbers are compared with $394 million, or 90 cents per share, earned for the same period last year.

Part of Costco’s profit came from a tax benefit of 14 cents per share. But even when the tax benefit is removed, the results beat the expected $1.06 per share, according to a poll of analysts by FactSet.

Wall Street analysts predicted a revenue of $24.85 billion and were not disappointed as the company’s revenue was slightly above at $24.87 billion. The number is up eight percent from the previous year’s $22.97 billion. Costco attributed the revenue to an increase in members.

Fees increased to $528 million from $459 million the previous year. Revenue at stores open for more than a year also rose by five percent in the United States. A retailer’s health is determined partially by the revenue from these stores, because it excludes stores that were either recently opened or recently closed.

Members currently pay up to $110 per year to shop at Costco, whether it is at the company’s stores or online. Their merchandise ranges from food and clothing to electronics and even diamonds. The company’s membership fees help to pad their bottom line. It also helps them offer lower prices and make thin profits off the product that gets sold.

Sandy Skyrovan, an analyst with Planet Retail, stated that Costco is currently outperforming its peers when it comes to sales growth and productivity. Skyrovan added, “The retailer’s ability to keep members engaged and coming back for more is unparalleled.” Costco currently competes for customers with BJ’s Wholesale Club and Walmart’s Sam’s Club chain.

With Costco’s profit soaring again, it is understandable that several analysts have maintained their “buy” ratings on the company’s stock.

[Image by Taisyo (Own work) [GFDL or CC-BY-3.0], via Wikimedia Commons]