Costco Earning Rise by 46%- Are Consumers Back Shopping?

Costco Wholesale Corp.'s (COST) fiscal third-quarter earnings rose by nearly half as the nation's largest wholesale-style retailer saw increased demand for discretionary products and strong international sales.

Costco's comparable-store sales rose 10%, reflecting growth rates of 6% in the U.S. and 26% internationally. Excluding the impact of gasoline sales and a stronger dollar, quarterly same-store sales would have risen 4%, the Issaquah, Wash.-based retailer said.

Consumers in the U.S. purchased deli, frozen and fresh foods and other consumables, but they also spent beyond basics for discretionary merchandise such as small appliances and housewares. International markets, about a quarter of Costco's overall sales, continued to outpace demand in the U.S. as the company expands in markets such as Taiwan and Australia.

There was concern coming into the report that Costco wouldn't fare well, given its recent run of poorer-than-expected performances. But analysts said the retailer gained from a resurgence of buying by consumers who, while still cautious, are more willing to buy discretionary items. Costco benefited from not having to pull down prices in order to book sales during the quarter, and also planned its merchandise mix well, analysts said. Total inventory grew only 5.1% from a year ago, while revenue increased 12.3%.

For the quarter ended May 9, Costco posted a profit of $306 million, or 68 cents a share, up from $210 million, or 48 cents a share, a year earlier. Total revenue increased to $17.78 billion. Analysts polled by Thomson Reuters most recently estimated earnings of 66 cents and $17.6 billion in revenue.

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