Costco Wholesale Corporation (NASDAQ :
COST) is scheduled to release its Q3 2010 results after the market closes on May 26, 2010. On May 6, Costco Wholesale Corporation reported net sales of $5.83 billion for the month of April; the four weeks ended May 2, 2010, an increase of 13% from $5.18 billion in the same four-week period last year. This year's four-week period for April included 28 days of sales compared to 27 last year; Easter fell in the reporting month of April last year. This calendar shift positively impacted this year's April total and comparable sales by approximately 2 to 3%.
Costco Wholesale Corp. operates membership warehouses based on the concept that offering members very low prices on a limited selection of nationally branded and selected private label products in a wide range of merchandise categories will produce high sales volumes and rapid inventory turnover. This rapid inventory turnover enables Costco to operate profitably at significantly lower gross margins than traditional wholesalers, discount retailers and supermarkets.
As for the Q2 2010, net sales increased 11%, to $18.36 billion, from $16.49 billion during the Q2 of fiscal 2009. Net income for the Q2 of fiscal 2010 was $299 million, or $.67 per diluted share, compared to $239 million, or $.55 per diluted share, during the Q2 of fiscal 2009. The Company recorded a $22 million pre-tax charge ($0.03 per diluted share) related to a change in employee benefits in the Q2 of fiscal 2010 whereby certain unused time off will now be paid annually to the employee. Costco online, both Costco.com and Costco.ca in Canada were profitable and growing for Q2 and Q3 year-to-date sales and profit in these operations were up over last year. In Q2 year-over-year traffic was up 8%.
Analysts' estimates for Q3 2010 range from a low of $0.63 to a high of $0.71, compared to a consensus estimate of $0.67, with number of estimates being 19 and the co-efficient variance 3.30. F/X should add 270 bps to SG&A growth in 3QF10 and only 80 bps in 4QF10. Healthcare's impact to SG&A growth should fall to 170 bps from 260 bps in 3Q and 4Q as 25% increases in healthcare costs should slow to 15%. On April 22, COST announced that its Board of Directors had declared a quarterly cash dividend on its common stock and approved a quarterly increase from $.18 to $.205 per share, or $.82 per share on an annualized basis. The dividend of $.205 per share is payable May 21, 2010, to shareholders of record at the close of business on May 7, 2010. In terms of expansion, in Q1, COST opened six new locations, with no relocations. In Q2, 2, including a relocation and Q3 will see another one open in Pacoima, California, with a total of 8 in Q4.
The stock closed at $ 57.77 on May 19, 2010 and most analysts' recommend rate this stock as a relative Overweight with an average price target of $65.50.
