Costco Wholesale Corp. reported a 16% jump in quarterly profit as the second-largest U.S. club store operator reaped stronger sales of fresh produce and other foods.
Fresh food sales were up âa little overâ 5% during the quarter ended Aug. 29, Costcoâs chief financial officer Richard Galanti said during an Oct. 6 conference call that followed the release of the companyâs fiscal 2010 fourth-quarter results.
âAll fresh food subdepartments were pretty good,â Galanti said. âFresh food has been an ongoing, continuing strength of ours.â
In fresh produce, prices were âslightly deflationary,â he said.
Fresh fruit, vegetable and meat sales boosted Costcoâs sales much of the past year, reflecting the increasing popularity of club stores, which charge membership fees for access to discounted goods in bulk quantities. Costcoâs fees begin at $50 a year.
Club stores, along with general merchandisers such as Wal-Mart Stores Inc., have expanded share in U.S. retail food at the expense of traditional supermarkets as consumers seek lower prices and access to nonfood items at the same locations they buy groceries.
During the recent quarter, Costcoâs sales at U.S. stores open at least a year rose 3%, excluding gasoline, compared with the same period a year earlier, the Issaquah, Wash.-based company said today. In September, sales rose 2% excluding fuel, the 11th monthly increase over the past 12 months. Costco doesnât provide sales information that excludes gasoline.
Costco expects to open more stores in coming years, adding locations at a pace that eventually may vault the company above Samâs Clubs as the nationâs biggest club store operator.
During Costcoâs fiscal year 2011, which began Aug. 30, the company expects to open about 31 new stores, including 16 in the U.S., Galanti said. Costco currently operates 417 stores in the U.S. and Puerto Rico and 79 in Canada.
Opening an average of 16-17 new stores a year in the U.S. over the next decade is ânot implausible,â Galanti said. Longer term, Costco expects to have at least 550 stores to as many as 625, he said. âWe feel thereâs plenty of opportunitiesâ for growth, Galanti said.
Samâs Club, a unit of Wal-Mart, is the top U.S. club store operator by number of locations, with 596 at the end of 2009.
During the quarter, Costcoâs net income rose to $432 million, or 97 cents a share, from $374 million, or 85 cents, a year earlier. Sales rose 7.6% to $24.1 billion. Per-share profit beat analystsâ expectation by about 2 cents, according to Thomson Reuters I/B/E/S.
Costco stock is up 7.7% this year, reaching a two-year closing high of $65.05 on Oct. 1.