ISSAQUAH, Wash. — Costco Wholesale Corp. here said last week it's seeing some deflationary pricing from manufacturers as private-label sales increase, but it's still tough to pick up business.
Deflation is just under 2% in food and sundries, with lower prices in “some big-volume categories” like paper goods and dry goods, Richard Galanti, executive vice president and chief financial officer, said during a conference call to discuss financial results for the fourth quarter and fiscal year that ended Aug. 30.
With private-label lines priced 20% to 30% below the brands, “it didn't take very long for the national or regional brands to come down, because they were losing dramatic market share. [But] that's all done now, and we don't see [prices] coming down a lot more any time soon,” Galanti said.
With ongoing competition from Sam's, Wal-Mart “and BJ's to some extent,” he added, “we're out there being tougher, and while we don't see it getting more competitive, it's not like anything has lightened up a lot either.”
For the 16-week fourth quarter, net income fell 6% to $374 million, while total revenues, including membership fees, dropped 3.3% to $22.4 billion and comparable-store sales dropped 6% in the U.S. and 5% overall.
For the year, net income declined 15.4% to $1.1 billion, while total revenues fell 1.5% to $71.4 billion and comps were down 2% in the U.S. and 4% overall.
The company said financial results this year benefited from a LIFO credit of $11 million after taxes, while results for the prior year include a $21 million pre-LIFO charge and a $10 million charge related to a litigation settlement.
Galanti said results were negatively impacted by ongoing softness in U.S. sales due primarily to the weak economy, higher employee benefit costs and lower dollar amounts of international profits resulting from weaker foreign currencies. However, he said U.S. comps during September were positive and exceeded those in the fourth quarter.
|Inc./Share||85 cents||90 cents|
*NET SALES, EXCLUDING MEMBERSHIP FEES, FELL 3.3% TO $21.9 BILLION FOR THE QUARTER AND 2% TO $69.9 BILLION FOR THE YEAR.