Costco’s Sales Rise

Costco Wholesale Corporation (COST), one of the leading U.S. warehouse club operators, recently posted healthy sales data for the four-week period ended August 1, 2010.

After portraying an increase of 4% in June 2010, Costco’s comparable-store sales for July rose 6%, reflecting a comparable sales growth of 4% at its U.S. locations and 14% at its international divisions. Year-to-date comparable-store sales grew 7% with U.S. sales up 4% and international sales up 20%. The results were favorably impacted by rising gasoline prices and a weaker U.S. dollar. Excluding the effects of gasoline prices and a softer dollar, Costco’s comparable-store sales for July climbed 4% with U.S. comparable sales up 3%, while international comparable sales were up 8%.

Year-to-date comparable-store sales grew 3% with U.S. sales up 2% and international sales up 9%.
Total net sales for July surged 8% to $5.86 billion from $5.42 billion in the same month last year. Year-to-date sales increased 9% to $70.37 billion from $64.44 billion delivered in the same period last year.

On a regional basis, Costco registered robust performance in the Midwest, Texas, the Southeast and the Northwest regions in the United States, and in Korea, Taiwan and Canada.

Costco, which faces stiff competition from BJ’s Wholesale Club Inc. (BJ) and Sam’s Club, a division of Wal-Mart Stores Inc. (WMT), currently operates 569 warehouses, including 415 in the United States and Puerto Rico, 78 in Canada, 32 in Mexico, 21 in the United Kingdom, 9 in Japan, 7 in Korea, 6 in Taiwan and 1 in Australia.

Costco is well positioned to weather the difficult economic environment given its focus on low prices. Rising gasoline prices coupled with improved consumer spending helped comparable-store sales growth. Moreover, expansion into new markets will continue to boost top line. However, aggressive pricing in response to stiff competition, to gain market share and drive traffic, may depress sales and margins.

COSTCO WHOLE CP (COST): Free Stock Analysis Report

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