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Costco Comps Rise

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Costco Wholesale Corporation (COST - Free Report) , one of the leading U.S. warehouse club operators, recently posted sales data for the four-week period ended November 25, 2012 that betters analysts’ expectations. Sales for the month were positively impacted by inflation in gasoline prices and favorable foreign currency fluctuation.

After an ascension of 7% in October, Costco’s comparable-store sales for November climbed 6%, reflecting comparable sales growth of an equivalent percentage at its U.S. locations and 7% at international outlets. In the prior-year period, the company delivered comparable-store sales growth of 9%.   

Costco’s comparable-store sales for the 12-week period ended November 25, 2012 rose 7% buoyed by a 7% and 9% jump in comparable-store sale in the U.S. and international locations.

Excluding the effects of gasoline prices and foreign currency fluctuations, Costco’s comparable-store sales for November rose 5% with U.S. and international comparable-sales elevating 6% and 5%, respectively. For the 12-week period, the company witnessed comparable-store sales growth of 6%, with U.S. sales increasing at an equal rate and international sales rising 7%.

Total net sales for November jumped 9% to $8.15 billion from $7.51 billion in the year-ago period. Costco’s sales for the 12-week period increased 10% to $23.21 billion from $21.18 billion in the year-ago quarter.

Costco continues to be a dominant retail wholesaler based on the breadth and quality of the merchandises it offers. The company’s strategy to sell products at heavily discounted prices has helped it sustain growth amidst beleaguered economic conditions, as cash-strapped customers continue to reckon Costco as a viable option for low-cost necessities.

The company also declared a special dividend of $7.00 per share amounting to approximately $3 billion that will be financed from the proceeds of the $3.5 billion debt-offering. The dividend will be paid on December 18 to stakeholders of record as of December 10. Costco will also pay its regular quarterly dividend of 27.5 cents on November 30 to stakeholders of record as on November 16.

With the “fiscal cliff” making its way in, many companies are contemplating dividend increases and special dividend payouts in light of a probable rise in dividend tax rate from the beginning of next year. The tax rate could go up to 39.6% from the current 15%.

Dillard's Inc. (DDS - Free Report) declared a special dividend payout of $5 per share, Walt Disney Co. (DIS - Free Report) hiked its annual dividend by 25% whereas Wal-Mart Stores Inc. (WMT - Free Report) will pay its regular dividend on December 27 ahead of its scheduled date of January 2, 2013, Las Vegas Sands Corp. (LVS - Free Report) pronounced a special dividend of $2.75 per share, Wynn Resorts Ltd. (WYNN - Free Report) rewarded its shareholders with a special dividend of $7.50 per share in its recent third quarter and also doubled its quarterly dividend to $1.00 payable from the first quarter of 2013.

Coming back to Costco, the company now expects to open 4 new warehouses before December 31, 2012. It currently operates 618 warehouses, comprising 447 warehouses in the United States and Puerto Rico, 84 in Canada, 32 in Mexico, 22 in the United Kingdom, 13 in Japan, 9 in Taiwan, 8 in Korea and 3 in Australia.

We believe that the company’s decision to share more profits with shareholders in anticipation of the “fiscal cliff” might encourage analysts to pull their estimates upward, which in turn may enhance its Zacks Rank. Costco currently holds a Zacks #3 Rank that translates into a short-term “Hold” rating. At present, we maintain our long-term “Neutral” recommendation on the stock.

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