Costco Earnings Improve on Strong Same-Store Sales

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Costco Wholesale Corp. (NASDAQ: COST) reported third-quarter fiscal 2014 results before markets opened Thursday. The big-box club store posted diluted earnings per share (EPS) of $1.07 on revenue of $25.79 billion. In the same period a year ago, Costco reported EPS of $1.04 on revenue of $24.08 billion. Third-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $1.09 and $25.76 billion in revenue. Costco’s third fiscal quarter runs from mid-February to mid-May.

Same-store sales rose 5% in the United States during the quarter, 3% in the rest of the world and by a combined 4%, including sales of gasoline. Excluding gasoline sales and currency translation effects, U.S. same-store sales rose 6%, international sales rose 8% and combined sales rose 6%.

Membership fee revenue rose from $531 million to $561 million year-over-year, and operating income rose by $15 million from $722 million to $737 million.

Costco’s earnings press release is a skimpy document, so we will have to wait till the conference call later Thursday morning to get some details on the quarter. The earnings miss was not as widely off the mark as last quarter, when the company came up $0.12 short of estimates. The company also managed to top revenue expectations, which it failed to do in the prior quarter.

The company did not publish any guidance, but consensus estimates for the fiscal fourth quarter call for EPS of $1.52 on revenues of $35.17 billion. For the full fiscal year, EPS is expected to come in at $4.63 on revenues of $112.08 billion.

Costco operates 655 warehouse stores internationally and 464 in the United States. The company plans to open eight new stores by the end of its 2014 fiscal year in August.

Shares were inactive in premarket trading, having closed Wednesday night at $114.24 in a 52-week range of $107.38 to $126.12. Thomson Reuters had a consensus analyst price target of around $120.40 before the results were announced.

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