Traffic Gains Boost Costco's Q2 Results

ISSAQUAH, Wash. — Costco Wholesale Corp. [4] here said Wednesday increases in transaction size and customer frequency helped boost sales and earnings for its fiscal second quarter and first half, which ended Feb. 12.

Net income for the 12-week quarter jumped 13.2% to $394 million, while sales were up 10.1% to $22.5 billion and comparable-store sales, excluding fuel and foreign exchange rates, increased 7%. For the half, net income rose 8.2% to $714 million, with sales climbing 11.3% to $43.7 billion and comps up 7%.

Richard Galanti, executive vice president and chief financial officer, said average transaction size for the quarter rose 2.4% and average frequency was up 5.2%, with the biggest U.S. gains coming in the Midwest, the Northeast and the Southeast.

The company said it opened eight new locations through the first half and anticipates nine more, down from 11 originally anticipated to open in the second half. Galanti said the other two warehouses are scheduled to open during the first quarter of next year.

Asked how Costco plans to respond to growing competitive activity in Canada, Galanti said, "We will do what we do everywhere in the world — we will respond to any increased advertising and price competition by continuing to drive our own business."

He also said Costco has no plans to reduce the size of its warehouses to make finding new locations easier.

"We opened four stores in the Northwest more than 15 years ago in the 72,000-square-foot range, but over time we've expanded three of them to our normal range of 140,000 square feet to 145,000 square feet, and we intend to keep the focus on what we do," Gakanti said.