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Costco 2Q profit rises; international sales strong

Wed, 03/03/2010 - 2:30am
The Associated Press

Strong overseas sales growth and increased gasoline prices boosted Costco Wholesale Corp.'s revenue in the second quarter, and the warehouse club operator's profit climbed 25 percent.

Costco said Wednesday that its quarterly revenue rose 11 percent to $18.74 billion from $16.84 billion on improved net sales and membership fee growth, beating Wall Street's $18.56 billion.

A key sales figure climbed 9 percent, mostly on higher gas prices and the weaker dollar. Taking out those two factors, sales at stores open at least a year increased by a much smaller 3 percent.

This figure is a key indicator of a retailer's health because it measures results at existing stores rather than newly opened ones. A soft dollar leads to increased revenue for companies with overseas operations because foreign currencies translate back into more dollars.

Costco's same-store sales growth came mostly from its international sales, which climbed 26 percent. The U.S. figure rose a more modest 5 percent in the quarter. Removing higher gas prices and the softer dollar, the overseas sales figure climbed 10 percent while sales at U.S. stores open at least a year rose 2 percent.

The company's earnings grew to $299 million, or 67 cents per share, for the period ended Feb. 14. That's better than its profit of $239 million, or 55 cents per share, a year ago.

Quarterly results included a 3 cents-per-share charge related to an employee benefits change that will now allow some unused time off to be paid annually to the worker.

Analysts surveyed by Thomson Reuters, whose estimates usually remove one-time items, predicted a bigger profit of 72 cents per share.

Costco has been one of the stronger retailers during the economic downturn as shoppers have flocked to its stores to get deals on necessities like food and healthy and beauty products. But sales of discretionary items like furniture have been weak.

Costco Wholesale, based in Issaquah, Wash., runs 566 warehouses, including 413 in the U.S. and Puerto Rico, 77 in Canada, 32 in Mexico, 21 in the U.K., seven in Korea, six in Taiwan, nine in Japan and one in Australia.

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