WASHINGTON: COST succumbed to a negative earnings surprise in the first quarter of fiscal 2016. The company reported earnings of $1.09 per share that missed the Zacks Consensus Estimate of $1.17, and also declined 2.7% from $1.12 posted in the prior-year quarter due to higher operating expenses.
Delving Deeper
The warehouse retailer’s total revenue, which includes net sales and membership fee, rose 1.3% to $27,220 million in the reported quarter. Quarterly net sales went up 1.3% year over year to $26,627 million, whereas membership fee increased 1.9% to $593 million. However, total revenue fell short of the Zacks Consensus Estimate of $27,635 million, thus marking the fourth consecutive quarter of revenue miss.
Costco’s comparable-store sales (comps) for the quarter fell 1%, reflecting a 9% decline in locations at Canada and a 5% drop at other international outlets, partially offset by a 2% increase at U.S. locations. The company reported flat comps for November, after a decline of 1% in October and flat comps registered in September. While lower gasoline prices impacted U.S. comps, currency fluctuations adversely affected international comps.
Excluding the effect of lower gasoline prices and currency headwinds, the company witnessed comps growth of 6% during the quarter, with U.S., Canada and other international comps registering an increase of 6%, 9% and 7%, respectively.
Costco’s operating income in the quarter under review edged down 0.4% year over year to $767 million, whereas operating margin (as a percentage of total revenue) contracted 10 basis points to 2.8%.
Financial Aspects
Costco ended the quarter with cash and cash equivalents of $5,054 million and long-term debt (including current portion) of $6,126 million. The company’s shareholders’ equity was $10,848 million, excluding non-controlling interests of $232 million.
