FINANCE

Costco Q4 profit surges; reports flaw in financial controls

BY Marianne Wilson

Costco Wholesale Corp.’s profit rose 13.5% in the fourth quarter, even as its online growth lost some steam.

Costco earned $1.04 billion, or $2.36 a share, in the quarter ended Sept.2, compared with $919 million, or $2.08 a share, in the year-ago period.

Net sales increased 5% to $43.41 billion. Analysts had expected sales of $44.27 billion for the quarter. Store traffic increased 4.9%.

Total same-store sales rose 9.2%; U.S. same-store sales were up 10.8%. E-commerce sales rose 26.3%. It was the smallest increase in a year amid increased competition for grocery sales from such rivals as Amazon.

Net income for the full year was $3.13 billion, or $7.09 per diluted share, compared to $2.68 billion, or $6.08 per diluted share, in the prior year, which had an additional week. Net sales for year rose 9.7% to $138.4 billion. E-commerce comp sales jumped 31.3%, reflecting the company’s increased investment in digital.

Costco ended its 2018 fiscal year with 762 warehouses, including 527 in the United States and Puerto Rico, 100 in Canada, 39 in Mexico, 28 in the United Kingdom, 26 in Japan, 15 in Korea, 13 in Taiwan, 10 in Australia, two in Spain, one in France and one in Iceland. Costco also operates e-commerce web sites in the U.S., Canada, the United Kingdom, Mexico, Korea and Taiwan.

Costco cautioned it had uncovered weak internal controls that could have allowed someone to gain unauthorized access to its financial reporting systems. Costco said it was still reviewing its internal controls but the weakness identified related to “general information technology controls in the areas of user access and program change-management over certain information technology systems that support the company’s financial reporting processes,” it said.

“As of the date of this release, there have been no misstatements identified in the financial statements as a result of these deficiencies, and the company expects to timely file its Form 10-K,” and “remediation efforts have begun,” it said. Costco shares had ended the regular session.

Net income for the full year was $3.13 billion, or $7.09 per diluted share, compared to $2.68 billion, or $6.08 per diluted share, in the prior year, which had an additional week. Net sales for year rose 9.7% to $138.4 billion. E-commerce comp sales jumped 31.3%, reflecting the company’s increased investment in digital.

Costco ended its 2018 fiscal year with 762 warehouses,, including 527 in the United States and Puerto Rico, 100 in Canada, 39 in Mexico, 28 in the United Kingdom, 26 in Japan, 15 in Korea, 13 in Taiwan, 10 in Australia, two in Spain, one in France and one in Iceland. Costco also operates e-commerce web sites in the U.S., Canada, the United Kingdom, Mexico, Korea and Taiwan.

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