Costco Q3 Income Jumps 29% on 14% Sales Gain

Costco Wholesale Corporation's net sales for the third quarter of fiscal 2004 increased 14% to $10.67 billion from $9.34 billion during the third quarter of fiscal 2003. On a comparable warehouse basis, that is warehouses open at least a year, net sales increased 11%. Net income for the third quarter of fiscal 2004 increased 29% to $198.7 million, or $.42 per diluted share, from $153.8 million, or $.33 per diluted share, during the third quarter of fiscal 2003.

Net sales for the first thirty-six weeks of fiscal 2004 increased 14% to $32.31 billion from $28.28 billion during the first thirty-six weeks of fiscal 2003. Comparable warehouse sales during the first thirty-six weeks of fiscal 2004 increased 11% over the prior year's level.

Net income for the first thirty-six weeks of fiscal 2004 increased 22% to $585.6 million, or $1.23 per diluted share, compared to net income for the first thirty-six weeks of fiscal 2003 of $481.6 million, or $1.02 per diluted share.

Reported net sales were reduced by the implementation of Emerging Issues Task Force Issue No. 03-10 (“EITF 03-10”), “Application of Issue No. 02-16 by Resellers to Sales Incentives Offered to Consumers by Manufacturers,” which was effective at the beginning of the Company's fiscal 2004 third quarter, February 16, 2004. EITF 03-10, which primarily impacts Costco's vendor coupon and rebate programs, reduces net sales and merchandise costs by an equal amount and does not affect the Company's consolidated gross profit or net income. Had EITF 03-10 been in effect for the comparable 12-week and 36-week reporting periods in fiscal 2003, the reported net sales increases relative to those periods this year would have been 16 percent and 15 percent, respectively; and comparable sales increases for the 12-week and 36-week reporting periods would have been 13 percent and 12 percent, respectively.

                     COSTCO WHOLESALE CORPORATION
              CONDENSED CONSOLIDATED STATEMENTS OF INCOME
             (dollars in thousands, except per share data)
                              (unaudited)

                         12 Weeks Ended           36 Weeks Ended
                    ------------------------ -------------------------
                       May 9,      May 11,      May 9,       May 11,
                        2004         2003        2004          2003
                    ------------ ----------- ------------ ------------

REVENUE
 Net sales          $10,672,737  $9,344,959  $32,312,773  $28,275,854
 Membership fees        224,502     198,112      654,918      579,969
                    ------------ ----------- ------------ ------------
  Total revenue      10,897,239   9,543,071   32,967,691   28,855,823
OPERATING EXPENSES
 Merchandise costs    9,540,312   8,358,323   28,862,411   25,247,631
 Selling, general
  and administrative  1,050,728     923,309    3,167,746    2,779,139
 Preopening expenses      4,552       5,853       18,893       31,115
 Provision (income)
  for impaired assets 
  and closing costs      (8,500)      6,000       (1,500)      15,500
                    ------------ ----------- ------------ ------------
  Operating income      310,147     249,586      920,141      782,438
OTHER INCOME 
  (EXPENSE)
 Interest expense        (9,004)     (8,715)     (25,740)     (25,186)
 Interest income
  and other              14,188       9,179       35,163       25,796
                    ------------ ----------- ------------ ------------
INCOME BEFORE
 INCOME TAXES           315,331     250,050      929,564      783,048
 Provision for
  income taxes          116,673      96,270      343,939      301,474
                    ------------ ----------- ------------ ------------
NET INCOME          $   198,658  $  153,780  $   585,625  $   481,574
                    ============ =========== ============ ============

NET INCOME PER
 COMMON AND
 COMMON EQUIVALENT
 SHARE:
 Basic              $      0.43  $     0.34  $      1.28  $      1.06
                    ------------ ----------- ------------ ------------
 Diluted            $      0.42  $     0.33  $      1.23  $      1.02
                    ============ =========== ============ ============

Shares used in
 calculation (000's)
 Basic                  459,074     456,370      458,311      455,956
 Diluted                482,485     479,183      481,395      478,889