Costco Canada bucks overall results trend

TORONTO • Costco Wholesale Corp.’s samestore sales in Canada outpaced growth compared to all of the warehouse retailer’s other divisions in the second quarter, even as the company’s overall results fell short of market expectations Thursday.

The second-largest retailer in the U.S. behind Walmart reported lower net income of US$515 million in the period ended Feb. 12, or US$1.17 per diluted share, compared with earnings of US$546 million, (US$1.24) per diluted share, in the same period last year. Net sales rose six per cent to US$29.1 billion from US$27.6 billion a year ago.

Analysts were anticipating earnings of US$1.36 per share on revenue of US$29.9 billion, according to estimates from Thomson Reuters.

“Fresh food drives the business,” chief financial officer Richard Galanti told analysts on a conference call after markets closed. He noted profit margins were lower in part due to widespread food price deflation.

Same-store sales, an important measure of retail performance that strips out the effects of square footage changes, were up eight per cent at Costco in Canada and three per cent in the U.S.; they fell two per cent in other international markets. At rival Walmart Canada, samestore sales rose 0.2 per cent in the quarter ended Jan. 31.

Costco’s results have been particularly robust in the Canadian market, where it is building more stores this year. In fiscal 2014 through fiscal 2016, same-store sales excluding foreign exchange and gasoline averaged above 8 per cent, higher than all other regions where Costco operates, including the U.S.

The company also announced Thursday that it will hike its annual membership fees in June to $60 in Canada and the U.S. for its basic card and to $120 from $110 for its premium-level “executive” membership card. The retailer last increased the cost of its memberships in 2011.