Costco Quarterly Profit Surges 39% on Tax Benefit

Costco Wholesale Corp. (COST), the largest U.S. warehouse-club chain, said second-quarter profit rose 39 percent, helped by a tax benefit on a dividend paid to an employee retirement-savings program.

Net income in the quarter ended Feb. 17 rose to $547 million, or $1.24 a share, from $394 million, or 90 cents, a year earlier, the Issaquah, Washington-based company said today in a statement. Excluding a gain of $62 million from a tax benefit in connection with a dividend paid to a 401(k) savings plan, profit was $1.10 a share. Analysts projected $1.06, the average of 24 estimates compiled by Bloomberg.

Costco has worked to lower its already-discounted prices to lure more shoppers to its annual memberships. The strategy has worked, helping boost second-quarter sales at stores open for more than a year 5 percent, excluding changes in gas prices and foreign-currency exchange rates. Revenue by similar measures gained 1.2 percent at Wal-Mart Stores Inc. in the U.S. and 0.4 percent at Target Corp. (TGT) in their most recent quarters.

Costco rose 1.3 percent to $103.75 at the close in New York. The shares have added 5.1 percent this year, compared with an 8.9 percent gain for the Standard & Poor’s 500 Index.

Revenue from membership fees advanced 15 percent to $528 million, the company said. That was part of an 8.3 percent increase in total revenue to $24.9 billion, Costco said. That missed the $24.95 billion average estimate of 17 analysts.

About half of the gain in membership revenue came from fee increases, Chief Financial Officer Richard Galanti said on a call with analysts.

To contact the reporter on this story: Matt Townsend in New York at

To contact the editor responsible for this story: Robin Ajello at

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