* Profit $1.39/share vs Wall Street view $1.31
* Membership fee revenue up 18 percent
* Shares rise 3.8 percent in early trading
By Brad Dorfman
Oct 10 Costco Wholesale Corp posted a
higher-than-expected quarterly profit on Wednesday after the
U.S. warehouse retailer raised membership fees.
Costco, which has millions of members who pay annual fees to
shop at its giant stores, earned $609 million, or $1.39 per
share in the fiscal fourth quarter ended Sept. 2, compared with
$478 million, or $1.08 per share, a year earlier.
Analysts on average forecast earnings of $1.31 a share,
according to Thomson Reuters I/B/E/S.
Costco shares were up 3.8 percent at $103.46 in early
Membership fee revenue rose 18 percent to $694 million, due
in part a 10 percent fee increase for most U.S. and Canadian
members that went into effect starting in November 2011.
Strength in membership fee revenue should continue due to
the increase in fees, solid renewal rates, more sign-ups due to
new club openings, and a continued shift to higher-priced
"executive" memberships, Janney Capital Markets analyst David
Costco, which competes against Wal-Mart Stores Inc's
Sam's Club and privately-held BJ's Wholesale, is willing to take
a hit on margins to keep prices low so shoppers visit stores
more often. Costco typically prices everyday goods such as
bananas below supermarket prices, hoping shoppers will stock up
on other goods as well.
"While merchandise margins appear unlikely to expand
materially near-term (and perhaps contract slightly in any given
quarter), we believe Costco's recent pricing actions are
decidedly tactical," Robert W. Baird analyst Peter Benedict said
in a research not. He said the company was giving up a little
margin to reinforce customer loyalty.
The company previously reported that sales in the fourth
quarter rose 14 percent to $31.52 billion. Same-store sales rose
5 percent and were up 6 percent excluding the impact of
fluctuations in gasoline prices and foreign currency exchange