COSTCO WHOLESALE CORP NEW (COST) SEC Filing 10-K Annual report for the fiscal year ending Sunday, September 3, 2017
COSTCO WHOLESALE CORPORATION REPORTS FOURTH QUARTER AND
FISCAL YEAR 2017 OPERATING RESULTS AND SEPTEMBER SALES RESULTS
ISSAQUAH, Wash., October 5, 2017- Costco Wholesale Corporation (Costco or the Company) (Nasdaq: COST) today announced its operating results for the 17-week fourth quarter and the 53-week fiscal year ended September 3, 2017.
Net sales for the 17-week fourth quarter were $41.36 billion, an increase of 15.8 percent from $35.73 billion in the 16-week fourth quarter of fiscal 2016. Net sales for the 53-week fiscal year were $126.17 billion, an increase of 8.7 percent from $116.07 billion in the 52-week fiscal year of 2016.
The Company today also reported net sales of $12.40 billion for the month of September, the five weeks ended October 1, 2017, an increase of 12.1 percent from $11.06 billion during the similar period last year. (The five-week period this year included the last week of the 53-week fiscal year 2017 ended September 3, 2017).
Comparable sales for the 17-week fourth quarter, the 53-week fiscal year, and the 5-week September retail sales month were as follows:
|17 Weeks||53 Weeks||Sept. 5 Weeks|
Comparable sales for these periods excluding the impacts from changes in gasoline prices and foreign exchange were as follows:
|17 Weeks||53 Weeks||Sept. 5 Weeks|
Net income for the 17-week fourth quarter was $919 million, or $2.08 per diluted share, compared to $779 million, or $1.77 per diluted share, in the 16-week fourth quarter last year.
Net income for the 53-week fiscal year was $2.68 billion, or $6.08 per diluted share, compared to $2.35 billion, or $5.33 per diluted share, in the 52-week prior year. Net income was positively impacted by an $82 million ($0.19 per diluted share) tax benefit in connection with the third-quarter special cash dividend and other net benefits of approximately $51 million ($0.07 per diluted share after tax) for nonrecurring net legal and other matters.
The following information was filed by COSTCO WHOLESALE CORP NEW on Thursday, October 5, 2017 as an 8K 2.02 statement, which is a press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.
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- cost_10k_2017-10-18_63_130Financial - EarningsWe believe that our U.S. current and projected asset position is sufficient to meet our U.S. liquidity requirements and have no current plans to repatriate for use in the U.S. cash and cash equivalents and short-term investments held by non-U.S. consolidated subsidiaries whose earnings are considered indefinitely reinvested.
- cost_10k_2017-10-18_38_86Revenue - ProductExcluding the impact of gasoline price deflation on net sales, gross margin as a percentage of adjusted net sales was 11.14%, an increase of five basis points.
- cost_10k_2017-10-18_36_81Financial - EarningsGross margin on a segment basis, when expressed as a percentage of the segments own sales and excluding the impact of changes in gasoline prices on net sales segment gross margin percentage, increased in our U.S. operations, due to amounts earned under the co-branded credit card arrangement and non-recurring legal settlements and other matters as discussed above.
- cost_10k_2017-10-18_20_214Financial - DividendIn April 2017, the Board of Directors approved an increase in the quarterly cash dividend from $0.45 to $0.50 per share.
- cost_10k_2017-10-18_78_155Financial - DividendIn April 2017, our Board of Directors increased our quarterly cash dividend from $0.45 to $0.50 per share.
- cost_10k_2017-10-18_55_117Financial - DividendIn 2017 and 2015, our provision was favorably impacted by net tax benefits of $104 and $68, respectively, primarily due to tax benefits recorded in connection with the May 2017 and February 2015 special cash dividends paid to employees through our 401K Retirement Plan of $82 and $57, respectively.
- cost_10k_2017-10-18_3_12Revenue - ProductOur investments in merchandise pricing can, from time to time, include reducing prices on merchandise to drive sales or meet competition and holding prices steady despite cost increases instead of passing the increases on to our members, all negatively impacting near-term gross margin as a percentage of net sales gross margin percentage.
- cost_10k_2017-10-18_34_71Financial - EarningsThe gross margin of our core merchandise categories food and sundries, hardlines, softlines and fresh foods, when expressed as a percentage of core merchandise sales rather than total net sales, increased eight basis points due to increases in these categories other than fresh foods.
- cost_10k_2017-10-18_35_74Revenue - ProductExcluding the impact of gasoline price inflation on net sales, gross margin as a percentage of adjusted net sales was 11.40%, an increase of five basis points.
- cost_10k_2017-10-18_37_220Financial - EarningsThe gross margin of our core merchandise categories, when expressed as a percentage of core merchandise sales, increased 13 basis points, primarily due to increases in these categories other than fresh foods.
- cost_10k_2017-10-18_18_44Financial - Shares / EquityThe 2017 results were positively impacted by a $82 tax benefit, or $0.19 per diluted share, in connection with the special cash dividend paid to the Companys 401k Plan participants and other net benefits of approximately $51, or $0.07 per diluted share, for non-recurring net legal and other matters
- cost_10k_2017-10-18_38_90Financial - EarningsWarehouse ancillary and other business gross margin positively contributed one basis point, primarily due to hearing aids and e-commerce businesses, partially offset by our gasoline business.
- cost_10k_2017-10-18_27_58Revenue - ProductChanges in gasoline prices negatively impacted net sales by approximately $2,194, or 193 basis points, due to a 19% decrease in the average sales price per gallon.
- cost_10k_2017-10-18_45_111Revenue - GeographyChanges in foreign currencies relative to the U.S. dollar decreased our SG&A expenses by approximately $211 in 2016.
- cost_10k_2017-10-18_105_194Other - OtherWe are predominantly self-insured, with insurance coverage for certain catastrophic risks, for employee health care benefits, workers compensation, general liability, property damage, directors and officers liability, vehicle liability, and inventory loss.
- cost_10k_2017-10-18_17_212Financial - ExpenseSG&A expenses as a percentage of net sales decreased 14 basis points, driven by lower costs associated with the co-branded credit card arrangement in the U.S.
- cost_10k_2017-10-18_10_36Revenue - GeographyIn discussions of our consolidated operating results, we refer to the impact of changes in foreign currencies relative to the U.S. dollar, which are references to the differences between the foreign-exchange rates we use to convert the financial results of our international operations from local currencies into U.S. dollars for financial reporting purposes.
- cost_10k_2017-10-18_40_92Financial - EarningsSegment gross margin percentage increased in our U.S. operations predominantly due to a positive contribution from our core merchandise categories, primarily hardlines and softlines, and the LIFO benefit discussed above.
- cost_10k_2017-10-18_63_129Financial - Cash FlowManagement believes that our cash position and operating cash flows will be sufficient to meet our liquidity and capital requirements for the foreseeable future.
- cost_10k_2017-10-18_2_1Financial - EarningsWe believe that the most important driver of our profitability is sales growth, particularly comparable sales growth.
- cost_10k_2017-10-18_35_79Financial - EarningsThe gross margin percentage was also negatively impacted by five basis points due to a LIFO benefit in 2016 and one basis point in warehouse ancillary and other businesses.
- cost_10k_2017-10-18_18_43Financial - EarningsNet income increased 14% to $2,679, or $6.08 per diluted share compared to $2,350, or $5.33 per diluted share in 2016.
- cost_10k_2017-10-18_38_85Financial - EarningsTotal gross margin percentage increased 26 basis points compared to 2015.
- cost_10k_2017-10-18_36_84Financial - EarningsThe segment gross margin percentage increased in our Other International operations due to increases across all core merchandise categories, except fresh foods.
- cost_10k_2017-10-18_38_91Revenue - GeographyChanges in foreign currencies relative to the U.S. dollar negatively impacted gross margin by approximately $286 in 2016.
- cost_10k_2017-10-18_43_97Financial - ExpenseOperating costs related to warehouses, ancillary, and other businesses, which includes e-commerce and travel, were lower by nine basis points, primarily due to lower costs associated with the co-branded credit card arrangement in the U.S. of 18 basis points.
- cost_10k_2017-10-18_43_98Other - OtherThe improvement in terms in our current co-brand agreement as compared to the prior co-brand arrangement led to substantial year over year benefits in fiscal 2017.
- cost_10k_2017-10-18_35_76Other - OtherThe improvement in terms in our current co-brand agreement as compared to the prior co-brand arrangement led to substantial year over year benefits in fiscal 2017.
- cost_10k_2017-10-18_44_106Financial - ExpenseThis was largely due to: higher central operating costs of six basis points, predominantly due to costs associated with our information systems modernization, including increased depreciation for projects placed in service, incurred by our U.S. operations and higher stock compensation expense of four basis points, due to appreciation in the trading price of our stock at the time of grant.
- cost_10k_2017-10-18_5_26Financial - EarningsThe extent to which we achieve growth in our membership base, increase penetration of our Executive members, and sustain high renewal rates, materially influences our profitability.
- cost_10k_2017-10-18_54_230Financial - IncomeThe decrease in interest income in 2016 is attributable to lower average cash and investment balances, due in part to the payment of the outstanding principal balance and interest on the 0.65% Senior Notes in the second quarter of 2016.
- cost_10k_2017-10-18_2_8Revenue - ProductSales growth and gross margins are also impacted by our competition, which is vigorous and widespread, across a wide range of global, national and regional wholesalers and retailers.
- cost_10k_2017-10-18_103_193Other - OtherFuture events could cause us to conclude that impairment factors exist, requiring a downward adjustment of these assets to their then-current fair value.
- cost_10k_2017-10-18_9_35Financial - ExpenseCertain countries in the Other International segment have relatively higher rates of square footage growth, lower wages and benefit costs as a percentage of country sales, andor less or no direct membership warehouse competition.
- cost_10k_2017-10-18_35_75Legal - OtherThis increase was primarily due to amounts earned under the co-branded credit card arrangement in the U.S. of 15 basis points and a benefit of three basis points from non-recurring legal settlements and other matters.
- cost_10k_2017-10-18_65_134Financial - Cash FlowCash flow used in operations generally consists of payments to our merchandise vendors, warehouse operating costs including payroll and employee benefits, utilities, and credit and debit card processing fees.
- cost_10k_2017-10-18_14_209Revenue - ProductNet sales increased 9% to $126,172, driven by a 4% increase in comparable sales, sales at new warehouses opened in 2016 and 2017, and the benefit of one additional week of sales in 2017
- cost_10k_2017-10-18_31_65Revenue - GeographyEffective June 1, 2017, we also increased our annual membership fees in the U.S. and Canada for Gold Star individual, Business and Business add-on by $5 to $60 and for Executive Membership from$110 to $120 annual membership fee of $60, plus the Executive upgrade of $60 and the maximum 2% reward associated with Executive Membership increased from $750 to $1,000 annually.
- cost_10k_2017-10-18_8_33Financial - EarningsBecause our business is operated on very low gross margins, modest changes in various items in the income statement, particularly merchandise costs and SG&A expenses, can have substantial impacts on net income.
- cost_10k_2017-10-18_2_6Revenue - ProductGenerating comparable sales growth is foremost a question of making available to our members the right merchandise at the right prices, a skill that we believe we have repeatedly demonstrated over the long term.
- cost_10k_2017-10-18_2_7Revenue - ProductAnother substantial factor in sales growth is the health of the economies in which we do business, especially the United States.
- cost_10k_2017-10-18_4_23Revenue - ProductOur e-commerce business growth both domestically and internationally has also increased our sales.
- cost_10k_2017-10-18_105_195Other - OtherWe use different mechanisms including a wholly-owned captive insurance subsidiary and participate in a reinsurance program.
- cost_10k_2017-10-18_77_150Other - OtherThe remaining amount available to be purchased under our approved plan was $2,749 at the end of 2017.
- cost_10k_2017-10-18_38_88Financial - ExpenseThe LIFO benefit resulted largely from lower costs for merchandise inventories, primarily in food and sundries and gasoline.
- cost_10k_2017-10-18_16_211Financial - EarningsGross margin percentage decreased two basis points
- cost_10k_2017-10-18_65_136Other - OtherThe increase in net cash provided by operating activities for 2017 when compared to 2016 was primarily due to accelerated vendor payments of approximately $1,700 made in the last week of fiscal 2016, in advance of implementing our modernized accounting system.
- cost_10k_2017-10-18_80_160Other - OtherThere were no outstanding short-term borrowings under the bank credit facilities at the end of 2017 and 2016.
- cost_10k_2017-10-18_4_19Revenue - ProductWe also achieve sales growth by opening new warehouses.
- cost_10k_2017-10-18_28_59Revenue - ProductComparable sales were flat during 2016, with an increase in shopping frequency offset by a decrease in the average ticket.
- cost_10k_2017-10-18_23_47Revenue - GeographyChanges in foreign currencies relative to the U.S. dollar negatively impacted net sales by approximately $295, or 25 basis points, compared to 2016.
- cost_10k_2017-10-18_25_55Revenue - GeographyChanges in foreign currencies relative to the U.S. dollar negatively impacted net sales by approximately $2,690, or 237 basis points, compared to 2015.
- cost_10k_2017-10-18_43_100Financial - ExpenseThis was partially offset by higher payroll and employee benefit expenses of 11 basis points, primarily in our U.S. operations.
- cost_10k_2017-10-18_25_52Revenue - ProductNet sales increased $2,407 or 2% during 2016.
- cost_10k_2017-10-18_31_67Revenue - ProductThese fee increases had a positive impact on membership fee revenues during 2017 of approximately $23 and will positively impact the next several quarters.
- cost_10k_2017-10-18_30_62Revenue - ProductThe increase in membership fees was primarily due to membership sign-ups at existing and new warehouses, an extra week of membership fee revenue, the annual fee increase discussed below, and an increased number of upgrades to our higher-fee Executive Membership program.
- cost_10k_2017-10-18_28_60Revenue - ProductThe average ticket and comparable sales results were negatively impacted by changes in foreign currencies relative to the U.S. dollar and a decrease in gasoline prices.
- cost_10k_2017-10-18_23_45Revenue - ProductNet sales increased $10,099 or 9% during 2017, primarily due to a 4% increase in comparable sales, new warehouses opened in 2016 and 2017, and the benefit of one additional week of sales in 2017.
- cost_10k_2017-10-18_48_112Financial - ExpensePreopening expenses include costs for startup operations related to new warehouses, including relocations, development in new international markets, and expansions at existing warehouses.
- cost_10k_2017-10-18_35_73Financial - EarningsTotal gross margin percentage decreased two basis points compared to 2016.
- cost_10k_2017-10-18_44_104Financial - ExpenseSG&A expenses as a percentage of net sales increased 33 basis points compared to 2015.
- cost_10k_2017-10-18_106_203Financial - EarningsThese earnings would be subject to U.S. income tax if we changed our position and could result in a U.S. deferred tax liability.
- cost_10k_2017-10-18_24_49Revenue - ProductComparable sales increased 4% during 2017 and were positively impacted by an increase in shopping frequency and, to a lesser extent, an increased average ticket.
- cost_10k_2017-10-18_3_15Revenue - ProductRapidly changing gasoline prices may significantly impact our near-term net sales growth.
- cost_10k_2017-10-18_2_4Revenue - ProductSales comparisons can also be particularly influenced by certain factors that are beyond our control: fluctuations in currency exchange rates with respect to the consolidation of the results of our international operations and changes in the cost of gasoline and associated competitive conditions primarily impacting our U.S. and Canadian operations.
- cost_10k_2017-10-18_105_197Legal - OtherThe estimated accruals for these liabilities could be significantly affected if future occurrences and claims differ from these assumptions and historical trends.
- cost_10k_2017-10-18_43_96Revenue - ProductExcluding the impact of gasoline price inflation on net sales, SG&A expenses as a percentage of adjusted net sales was 10.33%, a decrease of seven basis points.
- cost_10k_2017-10-18_75_145Financial - DividendThe primary uses of cash in 2017 were related to dividend payments, predominantly the special dividend paid in May 2017, and the repayments of debt totaling $2,200 representing the aggregate principal balances of the 5.5% and 1.125% Senior Notes.
- cost_10k_2017-10-18_38_87Other - OtherA larger LIFO benefit in 2016 compared to 2015 positively contributed three basis points.
- cost_10k_2017-10-18_31_68Revenue - ProductWe expect these increases to positively impact membership fee revenue by approximately $175 in fiscal 2018.
- cost_10k_2017-10-18_45_108Financial - Expensematters during 2016 negatively impacted SG&A expenses by two basis points.
- cost_10k_2017-10-18_67_138Financial - Cash FlowCash flow used in investing activities is primarily related to funding warehouse expansion and remodeling.
- cost_10k_2017-10-18_43_95Financial - ExpenseSG&A expenses as a percentage of net sales decreased 14 basis points compared to 2016.
- cost_10k_2017-10-18_2_3Revenue - ProductComparable sales growth is achieved through increasing shopping frequency from new and existing members and the amount they spend on each visit average ticket.
- cost_10k_2017-10-18_6_27Financial - ExpenseOur financial performance depends heavily on our ability to control costs.
- cost_10k_2017-10-18_43_102Financial - ExpenseStock compensation expense was also higher by one basis point.
- cost_10k_2017-10-18_101_190Financial - ExpenseOther consideration received from vendors is generally recorded as a reduction of merchandise costs upon completion of contractual milestones, terms of agreement, or using other systematic approaches.
- cost_10k_2017-10-18_8_32Financial - ExpenseThis may cause us, for example, to absorb costs that other employers might seek to pass through to their workforces.
- cost_10k_2017-10-18_15_210Revenue - ProductMembership fee revenue increased 8% to $2,853, primarily due to membership sign-ups at existing and new warehouses, an extra week of membership fees in 2017, the annual fee increase, and executive membership upgrades
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- Form Type: Annual
- Number of times amended: 0
- Accession Number: 0000909832-17-000014
- Submitted to the SEC: Wednesday, October 18, 2017
- Accepted by the SEC: Tuesday, October 17, 2017
- Period Ending: September 2017