Costco Beats on Earnings, Revenues a Little Light

Costco Wholesale Corp. (NASDAQ: COST) reported fiscal fourth-quarter and full year 2016 results after markets closed on Thursday. The big box club store posted quarterly diluted earnings per share (EPS) of $1.77 on revenue of $36.56 billion. In the same period a year ago, Costco reported EPS of $1.73 on revenue of $35.78 billion. Fourth-quarter results compare to the Thomson Reuters consensus estimates for EPS of $1.73 and $36.81 billion in revenue.

For the 2016 fiscal year the company reported EPS of $5.33 on sales of $118.72 billion compared with EPS of $5.37 and revenues of $116.2 billion in 2015. Analysts were looking for EPS of $5.29 and revenues of $119.13 billion.

Same-store sales were down 1% in the U.S. during the quarter, up by 2% in Canada, and down by 2% in the rest of the world. Combined sales, including sales of gasoline, were flat. Excluding gasoline sales and currency translation effects, U.S same-store sales rose 2%, Canadian sales rose 5%, and international sales rose 1%. Combined sales increased by 3%.

For the full year combined same-store sales were also flat and sales excluding currency translation effects and gasoline were up 4%. U.S. same store sales rose 3% with these exclusions, while sales in Canada were up 8% and international sales rose 4%.

Membership fee revenue rose from $785 million to $832 million year over year in the quarter, and operating income rose by $35 million from $1.156 billion to $1.191 billion.

Merchandise costs rose by about $550 million and SG&A expenses were up by about $200 million. Net income for the quarter totaled $779 million, up from $767 million in the fourth quarter of 2015.

Net income for the year slipped slightly from $2.38 billion in 2015 to $2.35 billion. The company noted that 2015’s net income included the positive impact of a $57 million tax benefit.

The company did not publish any guidance, but consensus estimates for the company’s first fiscal quarter of 2017 call for EPS of $1.21 on revenues of $28.68 billion. For the full 2017 fiscal year, EPS is expected to come in at $5.96 on revenues of $128.52 billion.

Shares closed down about 1.3% on Thursday at $147.49 and traded up by about the same percentage at $149.45 in Thursday’s after-hjours session. The stock’s 52-week range is $138.57 to $169.73. Thomson Reuters had a consensus 12-month price target of $169.38 before results were announced. The high price target is $195.00.

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