Q2 Sees Costco's Fresh Food Driving Sales Growth in Double Digits

ISSAQUAH, Wash. -- Fresh food is still driving double-digit growth for Costco Wholesale Corp., which saw its fiscal Q2 results still beat Wall Street expectations even though profits slipped 3 percent during the period.

News of the latest quarterly performance boosted the company's shares 1.2 percent to $52.80 at Thursday evening's close on Nasdaq market, its highest stock price since mid-2000.

Fresh is a consistent winner for the warehouse club operator. "Within food and sundries, which includes nine departments, there were no real standouts," said c.f.o. Richard Galanti during a conference call yesterday. "Fresh foods, however, continue to be strong."

Costco's sales for the quarter were $13.78 billion, up 11 percent to from last year's $12.41 billion. Net income for the period was $296.2 million, or 62 cents per share, compared to $305.5 million, or $.62.

Sales for the first half of fiscal 2006 increased 11 percent to $26.45 billion, up from $23.75 billion last year. Net income for the first half increased 3 percent to $512 million, or $1.06 per share, compared $498.6 million, or $1.02.

Comparable sales for the latest quarter increased 7 percent, while for the half they grew to 8 percent. International comps fared better, seeing a 10 percent increase both for the quarter and half.

February sales totaled $4.21 billion, an increase of 11 percent from $3.78 billion for the same period last year, the company added.

Costco operates 471 warehouses, including 346 in the United States and Puerto Rico, 66 in Canada, 17 in the United Kingdom, five in Korea, four in Taiwan, five in Japan and 28 in Mexico. The company also operates Costco Online, an electronic commerce web site, at www.costco.com and at www.costco.ca in Canada.

The retailer said it plans to open 18 to 20 new warehouses, including the relocation of two to three warehouses to new facilities, prior to the end of its 53-week 2006 fiscal year ending on September 3.
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