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Costco Q4 profit up 11%, raises membership fees

BY Marianne Wilson

Issaquah, Wash. — Costco Wholesale Corp. reported an 11% increase in its fourth quarter net income, below forecasts. The company also announced that it will raise its membership fees starting Nov. 1.

Costco’s net income rose to $478 million for the period ended Aug. 28, up from $432 million in the year-ago period. The quarter included a "last-in, first-out" inventory charge of four cents per share. This charge reflects a requirement that the company revalue its inventory if prices rise or fall notably.

Revenue rose 17% to $28.18 billion as membership fee revenue increased to $590 million from $533 million. The company said its performance was also helped by sales from its Mexico joint venture.

Same-store sales climbed 10% in the United States, and 19% abroad. Removing the impact of inflation in gas prices and strengthening foreign currencies, same-store sales rose 7%.

Costco announced it will raise annual membership fees by $5 to $55 for U.S. individual, business and business add-on members, as well as Canada business members beginning Nov. 1. The membership fee increase follows a similar move by BJ’s Wholesale Club.

Costco’s executive membership annual fees will also increase in the United States and Canada to $110 from $100. The maximum 2% reward tied to the executive membership will rise from $500 to $750.

For the year, Costco’s earnings rose 12% to $1.46 billion, and annual revenue rose 14% to $88.92 billion.

Same-store sales were up 10%, rising 7% in the United States and 16% overseas.

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Front-end sales strong at Walgreens

BY CSA STAFF

DEERFIELD, Ill. — Walgreens on Wednesday reported September sales of $6 billion, an increase of 5.4%. Sales in comparable stores increased 3.1%. The effect of calendar day shifts negatively impacted total comparable sales by 10 basis points.

Total front-end sales increased 5.1% in September, while comparable front-end sales increased 3.4%. Customer traffic in comparable stores increased 0.2% and comparable basket size increased 3.2%. According to Credit Suisse analyst Edward Kelly, strong front-end results are being "driven by re-inflation, improved merchandising and store remodels."

September pharmacy sales increased 4.6%, while comparable pharmacy sales increased 3%. Calendar day shifts negatively impacted pharmacy sales in comparable stores by 10 basis points. Comparable pharmacy sales were negatively impacted by another 170 basis points due to generic drug introductions in the last 12 months and by 110 basis points due to lower incidence of cough, cold and flu. Comparable pharmacy sales also were negatively impacted by 30 basis points due to fewer flu shots. Pharmacy sales accounted for 66.4% of total sales for the month.

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Recycle your blues, save some green from AEO

BY CSA STAFF

NEW YORK — American Eagle Outfitters announced that it has teamed up with Cotton Incorporated to launch a denim recycling program at more than 850 American Eagle Outfitters stores and 47 college campuses across the United States.

Through Oct. 18, American Eagle Outfitters customers are invited to bring any type of denim from any brand to American Eagle Outfitters stores. The denim is then given a “new life” by being converted into UltraTouchTM Denim Insulation, and provided to communities in need. Everyone who recycles their denim at AEO stores will receive a 20% discount on their entire purchase that day.

Additionally, 47 college campuses across the country, including Cornell University, University of Massachusetts, University of Central Florida, Texas State University and UCLA are participating. Recycling containers identical to the ones in stores will be placed in central locations and will accept donations during specified days and times. Customers who recycle their denim will receive a 20% off coupon to be used at any U.S. American Eagle Outfitters store. A full list of participating campuses is available at www.ae.com/studentunion.

“American Eagle Outfitters customers care about the environment, and want to help communities in need,” said Marcie Eberhart, director of the AEO Foundation. “This program enables them to do both, as well as receive a fantastic offer on the new fall collection.”

For a listing of participating American Eagle Outfitters locations and participating college campuses, as well as more information about the program, visit www.CottonFromBlueToGreen.org.

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