Costco Wholesale Corporation’s fourth quarter sales increased 13% to $22.63 billion from $20.1 billion during same period last year. Comparable warehouse sales during the 16-week fourth quarter of fiscal 2008 increased 9% over the corresponding 16-week period last year. Excluding gasoline price inflation, U.S. comparable sales would have been up 6% for the 16-week fourth quarter and up 4 percent for the 52-week fiscal year, both ended Aug. 31, 2008.

Net income for the quarter was $397.8 million, or 90 cents per diluted share, compared to net income of $372.4 million, or 83 cents per diluted share, during the fourth quarter of fiscal 2007. The increase of 7 cents per diluted share represents an increase of 8% year-over-year. The results were negatively impacted by a non-cash pre-tax LIFO charge of $32.3 million ($21.2 million, or 5 cents per diluted share, after-tax), primarily resulting from price increases in various food and grocery items and gasoline in the Costco’s U.S. merchandise inventories.

 

The quarter results also include a $15.9 million pre-tax charge ($10.4 million, or 2 cents per diluted share, after-tax) recorded in connection with a litigation settlement. Last year’s fourth quarter results were negatively impacted by a non-recurring, non-cash pre-tax charge of $56.2 million ($35.8 million, or 8 cents per diluted share, after-tax) to increase the company’s deferred membership revenue liability (and reduce membership fee revenue). Excluding these charges, fourth quarter fiscal 2008 net income per diluted share of 90 cents would have been 7 cents higher, and the fourth quarter fiscal 2007 net income per diluted share of 83 cents would have been 8 cents higher.

Net sales for fiscal year 2008 were $70.98 billion, an increase of 13% from $63.09 billion for fiscal year 2007. Comparable warehouse sales increased 8% over the corresponding 52-week period of the prior year. Net income was $1.28 billion, or $2.89 per diluted share, compared to $1.08 billion, or $2.37 per diluted share, last year.

 

Excluding the fourth quarter LIFO charge and litigation settlement, net income per diluted share for fiscal 2008 would have been 7 cents higher. Excluding the adjustment to membership fee revenue, as well as three additional items recorded in the second and third quarters of fiscal 2007, which in total aggregated to $188.7 million pre-tax ($119.5 million after-tax), net income per diluted share for fiscal 2007 would have been 26 cents higher.

For the first five weeks of its reporting period ended Oct. 5, 2008, the five-week retail reporting month of September, the company saw net sales of $6.67 billion, an increase of 10% from $6.05 billion during the similar five-week period of the prior year. The five-week U.S. comparable sales figure includes, among other things, the effect of gasoline price inflation, with the average sales price per gallon of gasoline up 31%, as compared to the year-earlier September. Excluding gasoline price inflation, U.S. comparable sales would have been up 6%. In addition, foreign exchange rates negatively impacted international comparable sales results. On a local currency basis, international comparable sales increased 8% in September.

Costco currently operates 544 warehouses, including 398 in the United States and Puerto Rico, 76 in Canada, 31 in Mexico, 20 in the United Kingdom, eight in Japan, six in Korea and five in Taiwan.

                          COSTCO WHOLESALE CORPORATION
                       CONSOLIDATED STATEMENTS OF INCOME
                  (dollars in thousands, except per share data)
                        16 Weeks     16 Weeks     52 Weeks      52 Weeks
                          Ended        Ended        Ended         Ended
                        August 31,  September 2,  August 31,   September 2,
                           2008        2007          2008         2007
                        ———–  ———–  ———–  ———–
REVENUE
  Net sales             $22,626,229  $20,089,064  $70,977,484  $63,087,601
  Membership fees           473,658      388,196    1,505,536    1,312,554
                        ———–  ———–  ———–  ———–
    Total revenue        23,099,887   20,477,260   72,483,020   64,400,155
OPERATING EXPENSES
  Merchandise costs      20,298,028   17,931,405   63,502,750   56,449,702
  Selling, general and
   administrative         2,186,191    1,969,988    6,953,804    6,273,096
  Preopening expenses        17,765       15,928       57,383       55,163
  Provision for impaired
   assets and closing
   costs, net                (6,171)       4,886          248       13,608
                        ———–  ———–  ———–  ———–
    Operating income        604,074      555,053    1,968,835    1,608,586
OTHER INCOME (EXPENSE)
  Interest expense          (32,057)     (32,303)    (102,636)     (64,079)
  Interest income and
   other                     35,006       59,009      132,775      165,484
                        ———–  ———–  ———–  ———–
INCOME BEFORE INCOME
 TAXES                      607,023      581,759    1,998,974    1,709,991
  Provision for income
   taxes                    209,195      209,337      716,249      627,219
                        ———–  ———–  ———–  ———–
NET INCOME              $   397,828  $   372,422  $ 1,282,725  $ 1,082,772
                        ===========  ===========  ===========  ===========
NET INCOME PER COMMON SHARE:
  Basic                 $      0.92  $      0.85  $      2.95  $      2.42
                        ===========  ===========  ===========  ===========
  Diluted               $      0.90  $      0.83  $      2.89  $      2.37
                        ===========  ===========  ===========  ===========
Shares used in calculation (000’s)
  Basic                     434,282      438,449      434,442      447,659
  Diluted                   443,874      448,733      444,240      457,641
Dividends per share     $     0.160  $     0.145  $      0.61  $      0.55