When Costco's (NAS: COST) co-founder and soon-to-be former CEO, Jim Sinegal, was here at The Motley Fool two years ago, he said something that has stayed with me ever since. He said that a good business grows market share in hard times. And given Costco's latest earnings release, it appears he was on to something.
Good businesses grow in hard times
Despite plummeting consumer confidence and a stagnant labor market, Costco's net sales for the quarter increased by 17% to $27.59 billion from $23.59 billion a year ago. Its net sales for the 52-week 2011 fiscal year, moreover, increased 14% to $87.05 billion from $76.25 billion last year.
Costco's comparable-store sales, the creme de la creme of retail statistics, also increased markedly. The warehouse giant reported same-store sales growth of 12% and 10% for the fiscal quarter and year, respectively. And while some of the increase resulted from higher gasoline prices and favorable currency conversions, without these effects the results would have nevertheless been impressive, coming in at 7% and 6% -- both of which are markedly above competitors like Wal-Mart (NYS: WMT) and Target (NYS: TGT) , which both saw same-store sales fall in the United States during these periods.
Costco's diluted earnings per share for the quarter were $1.08, compared with $0.97 a year ago, and for the fiscal year they was $3.30, compared with $2.92 in fiscal 2010.
Outlook going forward
Beyond these stellar numbers, the most promising news from the earnings release was the announcement that Costco will increase its annual membership fees by 10%, as virtually all of Costco's profit derives from these fees. Goldstar and Business members will now pay $55, as opposed to $50. And Executive members will pay $110, as opposed to $100.
Customers recently greeted similar fee increases by Bank of America (NYS: BAC) and Netflix (NAS: NFLX) with stern resistance, but I suspect that Costco's fee increase will go off without a hitch. In the first place, people aren't inclined to distrust Costco as they are Bank of America, given the latter's role in the 2008-09 financial crisis. And secondarily, Costco appears to have avoided the PR nightmare that accompanied Netflix's announcement to increase its fees and split into two separate companies.
Foolish bottom line
Given that today was likely to be Jim Sinegal's last conference call as Costco's CEO, share your thoughts below on the future of Costco without him. And be sure to add Costco to your Watchlist to track the success of this retail superstar.
At the time thisarticle was published Fool contributor John Maxfield has no financial position in any of the companies mentioned in this article. The Motley Fool owns shares of Bank of America, Wal-Mart Stores, and Costco Wholesale.Motley Fool newsletter serviceshave recommended buying shares of Netflix, Wal-Mart Stores, and Costco Wholesale, creating a diagonal call position in Wal-Mart Stores, and creating a bear put spread position in Netflix. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.