*COST closed the October 6th session higher by +4.68%...
Costco profit rises, sets $1 bln buyback Thursday October 6, 8:57 am ET
NEW YORK (Reuters) - Costco Wholesale Corp. (NasdaqNM:COST - News), the largest U.S. warehouse club operator, said fourth-quarter profit rose 20 percent on increased sales and lower taxes, while its board approved a new $1 billion stock buyback plan.
Costco's shares climbed 2.1 percent before the opening bell on the Inet electronic brokerage system.
The retailer on Thursday reported net income of $354.7 million, or 73 cents a share, in the quarter ended August 28, compared with $296.8 million, or 62 cents, in the year-earlier period.
Costco's results benefited from a sharp decline in taxes, reflecting a tax benefit of about 4 cents a share and lower state tax expense of 3 cents a share. Assuming a more normal tax rate, Costco said its net income would have been 66 cents a share.
Analysts, on average, had expected Costco to report profit of 65 cents per share, according to Reuters Estimates. Costco had estimated in May that quarterly profit would be between 63 cents and 67 cents per share.
"The company obviously had a tax benefit but even without it Costco's results were better-than-expected," said Ed Weller, an analyst at ThinkEquity Partners.
Costco, based in Issaquah, Washington, said net sales for the 16-week fourth quarter rose 10 percent to $16.4 billion, while sales at stores open at least a year -- or same-store sales -- rose 7 percent.
The big box retailer also reported an 11 percent increase in September sales at stores open at least a year. Net sales in the five weeks ended October 2 rose 13 percent to $5.14 billion.
U.S. comparable sales rose 10 percent, boosted as average gasoline prices rose by half from the year-ago period.
Costco has filling stations at many of its U.S. stores and usually tries to keep its pump prices below traditional gas stations in hopes of luring customers into stores. So sales volumes at its pumps jumped in September as fuel prices soared.
"Higher gasoline prices puts pressure on people's spending and makes them seek out discounts and makes them go to Wal-Mart or Costco, who are price leaders," Weller said.
Costco usually replenishes gasoline supplies daily when most gas stations acquire their inventory weekly. When energy prices soar, Costco must pay the new higher price while competitors are still selling supplies they bought for less, which can hurt profits.
The company announced a new stock buyback program of as much as $1 billion. Costco said it has repurchased $413 million of stock, at an average price of $44.87, from a previously approved $500 million plan.
Costco's shares rose 90 cents to $43.81 on Inet. In the last three months the stock has fallen 6.6 percent compared to a 16.2 percent drop for shares of rival BJ's Wholesale Club Inc. (NYSE:BJ - News).
Costco trades at about 18.7 times estimated 2006 earnings versus 14.4 times for BJ's, based on Wednesday's closing price.
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