FISCAL 3Q16 RESULTS

Costco reported fiscal 3Q16 revenues of $26.8 billion, slightly below the consensus estimate of $27.1 billion and up 2.6% year over year. Product revenues were $26.2 billion, up 2.5% year over year. Membership revenues were $618 million, up 5.8% year over year. Total comps were flat; comps were 0% in the US, up 1% in Canada and down 2% in other international regions. Comps had declined for two consecutive quarters before turning slightly positive in 2Q16. Excluding gasoline and foreign exchange, comps were up 3%, comprising a 3% increase in the US, an 8% increase in Canada and a 3% increase in other international regions. SG&A expense increased by 5.9% year over year, partially owing to the company’s announcement in March that it would raise entry-level wages by $1.50, to $13 an hour. EPS was $1.24, beating the consensus by two cents and up 6.1% year over year. Costco currently operates 705 warehouses, up from 686 at the end of FY15.