Costco Wholesale Corp (COST.O), the
biggest U.S. warehouse club operator, on Thursday reported a 32
percent jump in quarterly profit, beating expectations, as
shoppers flocked to its stores for discounts on food and
gasoline.
The results came the same that day that Sears Holding Corp
(SHLD.O), which is controlled by hedge fund manager Edward
Lampert, reported an unexpected first-quarter loss, as sales
fell at its Kmart and Sears stores and markdowns hurt margins.
"Sears' management is using the challenging economy as an
excuse for their poor performance, and Costco on the other hand
is capitalizing on the economy to push their core value
proposition with American consumers," said Craig Johnson,
president of retail consulting firm Customer Growth Partners.
"(Costco) is building market share by taking share from
folks like Sears and Kmart."
Costco and its rivals like Wal-Mart Stores Inc's (WMT.N)
Sam's Club and BJ's Wholesale Club Inc (BJ.N) have emerged as
bright spots in the struggling U.S. retail sector, as
cash-strapped shoppers, worried about the weakening U.S.
economy, increasingly seek out deals in the clubs.
Meanwhile, Sears is trying to overhaul its business as its
shoppers pass over clothes and home decor purchases in favor of
basics like food, and competitors have chipped away at Sears'
dominant market share in appliances.
Costco said net income was $295.1 million, or 67 cents per
share, for the fiscal third quarter, compared with $224.0
million, or 49 cents per share, a year earlier, when Costco
took a charge related to increased reserves for customer
returns.
Analysts, on average, expected earnings of 65 cents per
share, according to Reuters Estimates.
Sales in the quarter rose 13 percent to $16.26 billion,
excluding membership fees, which rose to $350.9 million from
$317.7 million, the Issaquah, Washington-based company said.
FLOCKING TO THE CLUBS
Customers pay an annual fee to shop in Costco's warehouse
clubs, which sell everything from discounted TVs and fresh
foods to bulk-sized packages of toilet paper and soda. Costco
also operates gasoline stations at many of its locations,
typically offering prices cheaper than local competitors.
Its quarterly sales at locations open at least a year, or
same-store sales, rose 8 percent. Same-store sales at its U.S.
locations rose 6 percent, while international same-store sales
advanced 16 percent.
Excluding gasoline price inflation, it said U.S. same-store
sales would have risen 4 percent, while on a local currency
basis, international same-store sales increased 6 percent.
In a research note, JPMorgan analyst Charles Grom said
given that Costco's quarter ended May 11, its 8 percent
same-store sales increase "implies solid top-line trends at the
beginning of the month."
That means Costco could report May same-store sales of
roughly 7.0 percent to 7.5 percent -- ahead of current Wall
Street estimates for a rise of 6.3 percent, he said.
Costco operates 538 warehouses worldwide, including 394
clubs in the United States and Puerto Rico, 75 in Canada, 19 in
the United Kingdom, six in Korea, five in Taiwan, eight in
Japan and 31 in Mexico.
It plans to open an additional nine to ten new warehouses,
including the relocation of four clubs, by August 31, which
marks the end of its fiscal year.
Costco shares rose 1.3 percent to $74.24 in recent Nasdaq
trading, while Sears shares fell 3.3 percent to $86.40.
(Reporting by Nicole Maestri and Steve James; Editing by
Derek Caney and Dave Zimmerman)
Related posts: