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Home » Costco investing in refrigerated and frozen food, says CFO in conference call
Industry News

Costco investing in refrigerated and frozen food, says CFO in conference call

December 11, 2009
KEYWORDS Costco / frozen foods / refrigerated foods
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For the first quarter of the current fiscal year, Costco, Issaquah, Wash., reported a net sales increase of 6.0% to $16.92 billion with comparable store sales up 3.0%.

Taking out the effects of gasoline sales and monetary transactions, the company comp remains the same but the result for the operation in the United States improves from 1.0% to 2.0%. The figure for international sales slips from 13% with the gasoline sales and monetary transaction impact included to 8.0% with them removed.

Net income for the fiscal 2010 first quarter was $266 million versus $263 million in the 2008 period, which results in a flat per diluted share return of 60 cents.

In a conference call reported by SeekingAlpha, Richard Galanti, Costco’s CFO, said low single digit comparable store sales gains in Costco’s fresh food and food and sundries categories trailed hardlines, including sporting goods and hardware, which posted a mid single digit gain, and softlines, including apparel, home furnishings and jewelry, which posted a low double digit advance. He said some edibles segments across the fresh food and food and sundry categories were up significantly in units but down in dollar sales due to deflation. Increased penetration of private label pressured some food category revenue numbers but boosted margins, he said.

During the conference call, Galanti, in response to an analyst question about depreciation, revealed at bit about how Costco is treating refrigerated and frozen food within its current operating strategy.

“The other thing that we have really pushed in the last couple of years…is remodel activity,” he said. “One of the things that we are notable for historically is all the places look pretty good and have the latest and greatest. We were spending a lot of money on fresh foods and refrigeration and frozen foods. Those are profitable departments, of course, and penetrations are up, and we are devoting a lot of money to things like that.”

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