Costco Beats Estimates by a Penny

The largest warehouse club retailer also announced a 2-for-1 stock split.
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Updated from 10:32 a.m. EST

Costco Wholesale

(COST) - Get Report

reported Thursday that its operating earnings rose 24% in its first fiscal quarter, exceeding Wall Street's consensus estimates by a penny.

Costco, the No. 1 warehouse club retailer, also announced a 2-for-1 stock split, for shareholders of record as of Dec. 24, 1999.

Costco's shares jumped 1 5/16, or 1%, to 93 9/16 in late morning trading Thursday. (Costco settled down 1/4 to 91 15/16.)

The company, based in Issaquah Wash., said its net income totaled $129.3 million, or 56 cents a diluted share, in the quarter ended Nov. 21. Analysts had been expecting 55 cents, according to a survey by

FirstCall/Thompson Financial

.

"Earnings were very solid," said Michael Shea, an analyst at

D. A. Davidson & Co.

who rates the stock outperform. His firm has not underwritten any offering for Costco. "It's not just one thing driving the sales; its everything, fresh foods, gas, and the pharmacy."

In the comparable quarter a year earlier, Costco posted operating earnings of $104.2 million, or 46 cents a share, before a one-time noncash accounting charge of $118 million for membership benefits.

"They saw a bit of gross margin expansion in the quarter," noted

Legg Mason Wood Walker

analyst Sally Wallick. "It appears their expansion program could be a little stronger than it first seemed by adding 10 stores in the first quarter and another 15 to 20 through the rest of the year." Wallick maintains an outperform rating on the stock and her firm has not underwritten any recent offering from Costco.

Sales for the wholesaler's first quarter of fiscal 2000 jumped 16% to $6.82 billion from $5.89 billion a year earlier.

Sales for stores open a year or more rose 13%.

The new clubs will have the added value of gas stations where the company charges 10 to 15 cents lower than the local prevalent price for members of the club, according to Wallick. "They're not going to make a lot of money but they won't lose money. And at the same time the potential member base goes up."

The company's stock is up 30% this year and near its all-time high of 98 11/16.

Costco operates a network of more than 300 stores, including 230 in the U.S., 59 in Canada, seven in the Britain, three in Korea, two in Taiwan, and one in Japan.