Costco (COST 224.70, -6.98) has given up 3.0% despite
reporting better than expected results for the fourth quarter.
The wholesaler reported above-consensus fourth quarter earnings of $2.36 per share on a 5.0% year/year jump in revenue to $44.41 bln, which was just ahead of expectations. However, the company's solid quarter was overshadowed by an acknowledgment that the company's upcoming annual report will show a material weakness in internal control. This weakness allowed users with access to the company's systems more privileges than they should have had. Costco expects the issue to be remediated by the end of fiscal year 2019. Comparable sales during the fourth quarter increased by 9.5% while comparable sales, excluding the impact of fluctuating fuel prices and foreign exchange, grew 7.2%.
Comparable sales in the United States rose 10.8%, ahead of the full-year growth rate (9.4%). Comparable sales in Canada grew 5.7% while Other International comparable sales increased 6.7%. E-commerce comparable sales increased 26.2%.
Revenue from membership fees increased 5.7% to $997 mln.
Costco opened 12 new locations during the fourth quarter. Seven new locations were opened in the United States and Puerto Rico, bringing the U.S. store count to 527. The company opened two new stores in Canada, increasing its store count to 100. One new store was opened in Mexico, increasing the local store count to 39. The company also opened new locations in South Korea and Australia. There are now 15 stores in South Korea and ten stores in Australia. Store counts in the United Kingdom (28), Japan (26), Taiwan (13), Spain (2), France (1), and Iceland (1) were unchanged during the quarter.
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