Costco Wholesale Corp., the largest U.S. warehouse-club chain, posted quarterly profit that topped estimates after sales outpaced those of discount rivals such as Wal-Mart Stores Inc.
Net income rose 17 percent to $496 million, or $1.12 a share, from $425 million, or 96 cents, a year earlier, the Issaquah, Washington-based company said today in a statement. Analysts had projected $1.09 per share for the fiscal first quarter, according to data compiled by Bloomberg.
As it heads into the year-end holiday season, Costco is outperforming other chains, including Wal-Mart and Target Corp. Sales at Costco stores open a year or more increased 7 percent, excluding changes in gasoline prices and foreign-currency exchange rates. In its most recent quarter, Wal-Mart reported a 0.5 percent increase in U.S. comparable-store sales, while Target posted a gain of 1.2 percent.
Costco’s solid – if uneventful – performance shows why investors are willing to “pay up” for the stock, Charles Grom, an analyst at Sterne Agee, said in a report. Its price-to- earnings ratio is almost 30, compared with less than 17 for Wal- Mart. Grom maintained his buy rating on the shares.
“There is no reason to get off this train,” he said.
Costco gained as much as 1.4 percent to $143.50 in early trading after the results were released. The shares had increased 20 percent this year, compared with an 11 percent advance for the Standard & Poor’s 500 Index.
Costco’s quarterly sales rose 7.4 percent to $26.9 billion, meeting the average analyst estimate. Revenue from membership fees advanced 6 percent to $582 million.
“Revenue growth of 7.4 percent outpaced the 3.3 percent increase in inventory – the company’s most favorable spread dating back to 2010,” Grom said.
A stronger dollar took a toll on international same-store sales, which grew just 1 percent when including the impact of currency fluctuations and gas-price deflation. They rose 7 percent without those effects.
Costco gets more than 70 percent of its sales from its home country. The company has 671 warehouse stores, with 474 in the U.S. and Puerto Rico.