Costco profits buoyed by membership fee hike

Warehouse club operator Costco Wholesale Corp. reported a better-than-expected quarterly profit on Thursday, helped by higher membership fees and strong sales in the United States.

Membership fees, which accounted for about 72 per cent of Costco’s operating income in 2016, rose four per cent in the third quarter ended May 7.

Sales at established stores open at least a year rose 5 per cent, excluding the impact of changes in gasoline prices and foreign exchange.

Analysts on average were expecting same-store sales to rise 3.7 per cent, according to research firm Consensus Metrix.

Net income attributable to Costco rose to US$700 million, or US$1.59 per share, in the latest quarter from US$545 million, or US$1.24 per share, a year earlier.

Excluding items, Costco earned US$1.40 per share. The Issaquah, Wash.-based company recorded a tax benefit of US19 cents per share related to a special cash dividend announced in April.

Total sales rose eight per cent to US$28.86 billion.

An additional boost in membership fees could come this quarter; a price increase is slated to go into effect June 1.

Analysts on average had estimated adjusted earnings of US$1.31 per share and revenue of US$28.54 billion, according to Thomson Reuters I/B/E/S.

Costco Wholesale Corp. shares had increased 9 per cent since the beginning of the year, while the Standard & Poor’s 500 index has increased nearly eight per cent.

Shares rose one per cent to US$174.73 Thursday and added an additional 1.8 per cent after the market closed.