Costco Reports Strong Sales, but Tax Charge Squeezes Profit
October 03 2019 - 7:21PM
Dow Jones News
By Sarah Nassauer and Micah Maidenberg
Costco Wholesale Corp. said Thursday sales rose in the latest
quarter, as the warehouse retailer works to offset the rising costs
of tariffs.
Comparable sales, or those from Costco stores open for more than
a year as well as online sales, increased 5% in the quarter that
ended Sept. 1. Online sales increased 22% in the period.
The company has been aided by strong consumer spending, which
has helped boost the U.S. economy for much of the year amid worries
about slowing global growth and uncertainty related to tariffs. But
the economy is growing at a slower pace than last year, and
consumer spending slowed slightly in August.
"We are still seeing good growth," said Richard Galanti, CFO of
the retailer, whose members skew higher income than many big-box
competitors. Costco sold a $222,000 diamond ring during the
quarter, he said.
Costco is working to speed shipments of products before tariffs
take effect or before duties are set to rise, said Mr. Galanti on a
conference call. "We've gone to pretty much every supplier on every
item to see what we can do" to reduce costs, and in some cases
Costco has cut orders, he said.
The Trump administration has imposed tariffs on the majority of
goods imported from China, with some to take effect later in the
year on consumer goods including toys and apparel. On Wednesday,
the administration said it would impose new tariffs on some goods
from the European Union.
Profit during the quarter rose to almost $1.10 billion, or $2.47
a share, from $1.04 billion, or $2.36 a share a year earlier. That
includes a $123 million charge related to taxes.
Last week Costco learned it owes more taxes on a product sold
between 2009 and 2016, said Mr. Galanti. An investor relations
executive declined to specify the product, but said the charge
involved a product subject to additional taxes like tobacco or
alcohol. Costco is filing a protest to the additional charge, but
set aside a reserve for the payment in the quarter. Without the
charge, profit would have been $1.19 billion, or $2.69 a share, he
said.
Costco said it generated about $47.5 billion in net sales and
membership fees in its fiscal fourth quarter, up from $44.41
billion a year earlier.
Along with rivals Walmart Inc. and Target Corp., Costco has
shown it can draw in customers and notch higher sales in a shifting
retail market. Investors have responded by bidding up shares in the
Issaquah, Wash.-based company 42% so far this year. Shares of
Costco fell 1.6% in postmarket trading Thursday.
Write to Sarah Nassauer at sarah.nassauer@wsj.com and Micah
Maidenberg at micah.maidenberg@wsj.com
(END) Dow Jones Newswires
October 03, 2019 19:06 ET (23:06 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
Costco Wholesale (NASDAQ:COST)
Historical Stock Chart
From Aug 2024 to Sep 2024
Costco Wholesale (NASDAQ:COST)
Historical Stock Chart
From Sep 2023 to Sep 2024