Costco tops expectations on higher sales

Costco Wholesale Corp. on Wednesday reported a fiscal second-quarter profit that topped Wall Street expectations as the company's low prices continued to attract customers and drive sales.

The wholesale club operator, based in Issaquah, Wash., said its net income rose 13 percent as sales at stores open at least a year increased.

During the economic downturn many consumers have looked to stretch their dollars by shopping at wholesale clubs, where they can get a deal on bulk groceries and household staples. Costco has also developed a reputation as a go-to place for shoppers who like a "treasure hunt" for impulse purchases of unexpected items.

Costco said net income rose to $394 million, or 90 cents per share, for the three months ended Feb. 12, compared with $348 million, or 79 cents per share, a year ago.

Analysts on average had forecast a profit of 88 cents per share, according to Fact Set.

For the latest quarter, Costco said revenue at stores open at least a year climbed 8 percent, or 7 percent when excluding the impact of higher gas prices and foreign currencies.

The metric is a key gauge of a retailer's health because it excludes results from stores recently opened or closed.

Even as big-box retailers and supermarkets struggle with rising fuel and commodity costs, Costco has made a strategic decision absorb rising costs to stock its shelves to take business from rivals such as BJ's Wholesale Club and Sam's Club.

The sacrifice on profit margins could be paying off.

On average, Costco said customers spent 2.4 percent more per visit during the quarter. The frequency of visits also rose to 5.2 percent.

"We're always going to match or try to be lower than our competitors," Chief Financial Officer Richard Galanti said.

Costco's shares edged up 79 cents to close at $86.06 Wednesday. Its shares have been flirting with their 52-week high of $88.68 set in early December. The stock was low as $69.54 this past March.

Net sales for the quarter increased to $22.5 billion from $20.45 billion a year ago. Revenue from membership fees also rose to $459 million from $426 million.

In February, the company noted that revenue at stores open at least a year was up 8 percent, or 7 percent when excluding the impact of gas prices and foreign currencies.

So far this fiscal year, Costco has opened eight new stores, including four in the United States and four in Japan. The company plans to open 17 this year.

Costco is the largest membership warehouse club in the country. The company operates 600 warehouses, including 433 in the U.S. and Puerto Rico.

It also has 82 in Canada, 32 in Mexico, 22 in the United Kingdom, 13 in Japan, eight in Taiwan, seven in Korea and three in Australia.

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Disney revenue short of expectations, shares slip

(Reuters) - Walt Disney Co reported a quarterly revenue increase that fell short of Wall Street expectations as media networks and theme parks gained but revenue at its movie studio declined.

Disney shares fell 1.8 percent to $40.28 in after-hours trading.

The operator of television networks ESPN and ABC, a movie studio and theme parks, posted fiscal first-quarter revenue of $10.8 billion, a 1 percent gain from a year earlier.

Analysts on average had expected revenue of $11.2 billion for the quarter.

Disney's studio division had a surprise hit with modestly budgeted film "The Muppets", but suffered from tough comparisons with home video sales for "Cars 2" versus the smash "Toy Story 3" a year earlier. The studio's revenue fell 16 percent in the quarter to $1.6 billion.

Revenue at media networks, the company's largest unit, gained 3 percent to $4.8 billion. Within that unit, broadcasting saw a 7 percent dip and margins fell, Gabelli & Co analyst Brett Harriss said. "That's the biggest negative that I saw," he said.

The theme parks unit, which like media networks have held up through a struggling economy, rose 10 percent. "Disney continues to exhibit pricing power, which shows the strength and competitive advantage of that business," Morningstar analyst Michael Corty said.

(Reporting By Lisa Richwine; Editing by Bernard Orr)

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DST beats Wall Street expectations for 4Q earnings

KANSAS CITY, Mo. (AP) — DST Systems Inc.'s shares rose in trading Tuesday after the data and software services company reported that its fourth-quarter results beat Wall Street expectations.

The company's net income fell to $41.8 million, or 93 cents per share, from $93.3 million, or $2 per share, in the same quarter a year ago. After adjusting for restructuring, employee termination and other special items affecting the quarters, the company earned $1.05 per share versus $1.07 last year.

That beat the 96 cents per share that analysts polled by FactSet anticipated.

Operating revenue rose more than 7 percent to $457.3 million, helped in part by acquisitions. Analysts forecast $437 million.

For the year the company earned $185.7 million, or $4.01 per share, compared with $318.5 million, or $6.73 per share, in 2010. Annual operating revenue increased almost 2 percent to $1.74 billion.

DST also announced that its board of directors nominated two new candidates, in addition to an existing third nominee. The company has been looking for new board members since December with the help of an outside executive search firm.

The company nominated Lowell Bryan, the 66-year old founder of consulting firm LL Bryan Advisory, and Samuel Liss, a 55-year old principal at WhiteGate Partners, for election. Travis Reed, a current director, will serve as the company's third nominee.

DST board members Thomas McCullough and William Nelson will not stand for reelection. The company's largest shareholder, George Argyros, backed the latest nominees.

Shares of DST rose $1.44, or 2.8 percent, to $52.19 in afternoon trading.

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