In the second quarter, Costco recorded company net income of $515 million, or $1.17 per diluted share, versus $546 million, or $1.24 per diluted share, in the year-earlier quarter.
Costco earnings per diluted share fell short of a MarketBeat published analyst average estimate of $1.36.
Comparable sales excluding the effects of gasoline price and foreign exchange rate fluctuation were up 3% for the company overall, with stores in the United States up 3%, those in Canada up 2% and those in other international markets up 3%. Company wide transactions gained 1% in the quarter while shopping frequency advanced 2%, Richard Galante, Costco’s CFO, said in a conference call, with the U.S. up 3% in frequency.
In terms of U.S. regions, strongest performing were the Midwest, Texas and the Northwest. As for merchandising categories, softlines comps increased in the low to mid single digits with apparel and home furnishings performing best among softlines segments. Hardlines comps were also up in the low to mid single digits, with tires, hardware and seasonal the strongest performing segments and consumer electronics down in the low single digits. The food and sundries category was flat year over year, with fresh food up in the low to mid single digits.
Online sales were up 11% on a comp basis in the second quarter, Galante said. He noted that Costco would continue enhancing customer experience and adding merchandise to its e-commerce operation as well as improving instocks on high velocity items. Recent initiatives include the addition of Samsung appliances. The company will continue adding new brands to the digital assortment across a range of product segments including Kohler bath and kitchen goods, and Spyder in ski and outerwear.
Costco posted net sales of $29.13 billion versus $27.57 billion in the year before quarter. Total revenue, including membership fees, was $29.77 million versus $28.17 million in the 2016 second quarter. Operating income was $844 million as compared to $856 million in the year-prior period with the year-over-year fall off occurring due to an increase in operating expenses.
In the conference call, Galante said, fuel price fluctuation, foreign exchange rate volatility and information technology spending were among the costs hitting the bottom line in the quarter.
Costco announced that, effective June 1, it would increase annual membership fees by $5 for U.S. and Canada Goldstar, Business, and Business add-on members, bringing the annual payment up to $60. Also effective June 1, annual fees for Executive Memberships in the U.S. and Canada will increase from $110 to $120 and the maximum annual 2% reward associated with Executive Membership will increase from $750 to $1,000.
