Costco Wholesale Corporation (COST), one of the leading U.S. warehouse club operators, recently reported first-quarter 2010 results. The quarterly earnings of 60 cents a share were in line with the Zacks Consensus Estimate and remained flat compared to the prior-year quarter.

Total revenue, which includes net sales and membership fee, climbed 5.5% year-over-year to $17,299 million from $16,395 posted in the year-ago quarter. A rise in merchandise costs (up 5.6%) and selling, general and administrative expenses (up 6%) weighed down the increase in revenue in the quarter.

Membership fee rose 5% to $377 million, whereas net sales jumped 5.3% to $16,922 million. Total comparable-store sales during the quarter climbed 3%, offset by lower gasoline prices and higher merchandise costs. U.S. comparable-store sales increased marginally by 1% and international comparable-store sales jumped 13% in the quarter under review.

Excluding lower gasoline prices and foreign currency translation, U.S. comparable-store sales rose 2%, and international sales climbed 8%. Costco faces stiff competition from BJ’s Wholesale Club Inc. (BJ) and Sam’s Club, a division of Wal-Mart Stores Inc. (WMT). Although consumers have been flocking to these warehouse clubs but they too are experiencing a weaker consumer-spending environment.

The warehouse-style retailer currently operates 566 warehouses, including 413 in the United States and Puerto Rico, 77 in Canada, 32 in Mexico, 21 in the United Kingdom, 9 in Japan, 7 in Korea, 6 in Taiwan, and 1 in Australia.

Zacks Investment Research

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