FINANCE

Costco Q2 profit falls 15%; will open 14 U.S. stores

BY Dan Berthiaume

Issaquah, Wash. – Costco Wholesale Corp. reported a bigger-than-expected 15% drop in net income for the second quarter amid deep-discounting during the holidays. Net income in the quarter ended Feb. 16 fell to $463 million from $547 million.

Costco blamed the lower earnings on several factors, including weaker sales of certain nonfoods merchandise categories and lower international profits. The year-ago period was also helped by a tax benefit.

The company noted that last year’s net income was positively impacted by a $62 million tax benefit.

“Even with that distinction, however, the year-over-year comparison was unfavorable,” said CFO Richard Galanti. “Despite satisfactory sales results during the second fiscal quarter, several other factors led to lower earnings. These factors included: weaker sales and gross margin results in certain non-foods merchandise categories, particularly during the four-week holiday selling season; weaker gross margins in our fresh foods business; and lower reported international profits, resulting from the significant weakening of foreign exchange rates.”

Net sales increased 6% to $25.76 billion, from $24.34 billion. Total same-store sales rose 3%. Costco cited a positive tax benefit the company received in fiscal 2012, as well as weaker sales and gross margins in several product categories and unfavorable foreign currency exchange rates as impacting its net income.

Costco also said it plans to open 14 new stores in the U.S. by the end of fiscal 2014.

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News

Oscar Mayer rolls out sizzling app

BY CSA STAFF

Oscar Mayer is giving bacon lovers a reason to wake up early. The brand has unveiled the first-ever iOS device that wakes people up with the smell of bacon. The device, called Wake Up & Smell the Bacon, syncs with the Oscar Mayer Wake Up & Smell the Bacon iPhone app to emit the scent and sound of sizzling bacon when the rooster crows.

Bacon lovers everywhere can apply from now through Friday, April 4 at http://wakeupandsmellthebacon.com/ for a chance to receive a free Wake Up & Smell the Bacon device. To use it, download the Wake Up & Smell the Bacon app and plug the detachable device into the headphone jack of an iPhone. The device will not be sold in stores and quantities are limited, so fans are encouraged to apply early and often.

Those who do not receive a device will still be able to download the Wake Up & Smell the Bacon application free in the App Store so they can wake up to the sound of sizzling bacon and bacon sayings or "baconisms."

Wake Up & Smell the Bacon is the latest brainchild of the Oscar Mayer Institute for the Advancement of Bacon, an online hub for bacon innovations from the Oscar Mayer brand. Last year OMIFAB created an e-commerce site to help consumers give the gift of bacon for Father’s Day in its Say It with Bacon campaign.

"With nearly 2 million mentions of #bacon on Instagram, it seems people never get tired of bacon. That’s why our team decided to develop a device to give folks what they long for most," said Tom Bick, senior director of integrated marketing and advertising at Oscar Mayer. "As the category leader, Oscar Mayer is thrilled to bring the first-ever, bacon-scented mobile device to market, giving bacon aficionados a new reason to welcome their morning alarm clocks."

Winning applicants will receive the Wake Up & Smell the Bacon device six to eight weeks after applications close. Bacon fans may apply for their chance to win the device once a day.

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REAL ESTATE

Staples to close 225 stores by end of 2015

BY Marianne Wilson

Framingham, Mass. — Staples on Thursday said it will close 225 stores by the end of 2015 amid falling fourth-quarter revenue, increased competition, and a shift to online sales. The big-box office-supply category, which was battered by the recession, has come under increased competition from Walmart and other discounters and online retailers such as Amazon. Most recently, Staples’ rivals Office Depot and OfficeMax completed a $1.2 billion merger.

The retailer said the closings, which will impact about 12% of Staples’ 1,500 U.S. outlets, are part of a plan to save $500 million in costs by the end of next year. Additional savings are expected to come from supply chain, labor optimization, non-product related costs, IT hardware and services, marketing, sales force, and customer service.

"A year ago, we announced a plan to fundamentally reinvent our company. With nearly half our sales generated online today, we're meeting the changing needs of business customers and taking aggressive action to reduce costs and improve efficiency," Staples CEO Ron Sargent said.

For the fourth quarter, Staples’ profit fell to $1.5 billion from $1.7 billion.

Total company sales fell 10.6% to $5.9 billion. Same-store sales in North America, excluding sales through Staples.com, fell 7%. Staples.com sales grew 10%.

Revenue at the company's international division fell 13%, hurt by weakness in Europe and Australia.

For the full year 2013, Staples’ North American stores and online achieved sales of $11.1 billion, down 6.1% from last year.

Staples did not disclose the location of the stores to be closed. The company has over 1,500 stores in the United States and more than 2,200 worldwide.

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