Retailer Costco (COST) saw its shares hit an all time high Wednesday of $104.43 after reporting fourth quarter and full fiscal year earnings. The retailer beat analysts' targets across the board for earnings and revenue for both time periods.
In the fourth quarter, Costco saw $31.52 billion in net sales, an increase of 14%. Membership fees also increased to $694 million, making a total of $32.2 billion in revenue. Same store sales (open 12 months) increased in both United States stores (+6%), and International stores (+2%). Net income was $609 million for the fourth quarter. The company reported earnings per share of $1.39 in the quarter, after posting $1.08 in the same period last year. Analysts on Yahoo Finance saw the company earning $1.31 per share from $31.69 billion in revenue.
Costco reported full year net sales of $97.06, a 12% increase from the prior fiscal year. Membership fees increased to $2.08 billion. In total, Costco saw full year revenue of $99.14 billion. The company posted $88.92 billion in revenue in the prior year. Net income increased to $1.71 billion for the fiscal year. Earnings per share came in at $3.89 for the full year. Same store sales increased 7% at United States stores, and 6% at International locations. For the full year, analysts were expecting $3.87 in earnings per share and $98.49 billion in revenue.
At the end of the fiscal year (September), Costco had 608 warehouses around the world. The company has been expanding internationally and now has stores based in these countries:
· 439 - United States/Puerto Rico
· 82 - Canada
· 32 - Mexico
· 22 - United Kingdom
· 13 - Japan
· 9 - Taiwan
· 8 - Korea
· 3 - Australia
Costco's current plans see fourteen additional locations opening before the end of the calendar year that would count towards fiscal 2013. In June, Costco bought out the 50% un-owned stake in a joint venture in Mexico. At the completion of the deal, Costco now has 100% ownership of all 32 stores in the country.
Shares of Costco closed at $101.56, up 2% on the trading day. The shares cooled off a little in the afternoon, after setting new all time highs around 11am Wednesday morning. In the last fifty two weeks, shares of Costco have traded between $78.81 and $104.43. Shares of Costco split back in 2000 when they traded close to triple digits. Expect a split announcement from the company soon.
Analysts see Costco earning $4.45 per share in fiscal 2013. The company is expected to post total revenue of $104.96 for the fiscal year. Shares appear expensive with a price to earnings ratio of over 20 going forward, but I believe they are attractive for several reasons:
· Continued international expansion - Only 28% of the current stores are outside of the United States. Costco has shown it can enter new markets with success and will likely add a new country or two each year going forward. I pointed out in 2011, the possibility of Costco or Wal-Mart (WMT) buying out international discounter retailer PriceSmart (PSMT).
· United States market opportunity - Costco trails Sam's Club in the United States in number of units. The Wal-Mart owned club retailer has 615 units compared to Costco's 439.
· Share Split - With shares hitting triple digits, the company is likely to split shares two for one as it did in 2000. While a stock split doesn't increase the value of the company, it does make shares "cheaper" on a dollar basis for average investors to purchase more shares of.
· Room for dividend growth - Costco has been raising its dividend payout since it started paying out on a quarterly basis. With a yield of just over 1%, the company has room to significantly increase its dividend going forward.
· Economy - With gas prices rising, Costco benefits from its own gas stations becoming key reasons for new membership sign-ups. Members are also signing up so they can buy in bulk and shop less often at traditional big box grocery stores. Costco's in store products offer significant savings to shoppers and could help those struggling in our current economic times.
Despite an all time share price set Wednesday, I don't think the Costco rally is done yet. Shares trade at over twenty times next year's earnings per share. However, earnings per share are expected to grow 14% in fiscal 2013. Earnings per share increased 18% from fiscal 2011 to fiscal 2012. If Costco can keep up its double digit growth in earnings, shares should offer nice returns for investors.