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Costco Workers Get Another Raise

Membership trends, gas profits highlight Q2 results
Photograph: Shutterstock

Costco Wholesale Corp. has quietly passed along another wage boost for its workers.

The Issaquah, Wash.-based warehouse club retailer has increased its starting hourly pay from $14 to $14.50 per hour in the U.S. and from $14.50 to $15 per hour in Canada, effective this week. In addition, the company passed along unspecified wage increases to supervisors that were incremental to annual pay adjustments typically made in March, and introduced a new paid bonding leave for parents.

The adjustment follows a starting wage raise that went into effect last June, and illustrates continued tightness in the labor market and another front in Costco’s battle with competitors.

Chief Financial Officer Richard Galanti announced the increases while reviewing Costco’s operating results for the fiscal second quarter, which ended Feb. 17.

In the period, Costed posted a 7.3% net increase in sales to $34.6 billion. In the U.S., comparable club sales, excluding gasoline, increased by 7.2%. Net income jumped by 26.8% to $889 million, while earnings per share of $1.95 easily blew past estimates of $1.69. Galanti said higher margins on gasoline accounted for much of the earnings surprise.

Because Costco buys gas more frequently than competitors and undercuts them on price, its profits can soar when its costs for gas are falling. Conversely profits can suffer when gas price inflates.

Costco said its member renewal rate was rising, a phenomenon Galanti related in part to struggles at some brick-and-mortar competitors

Earlier this week, Costco rival BJ’s Wholesale Club also cited strong membership trends as a contributor to quarterly financial results that exceeded estimates.

The Westborough, Mass.-based club operator reported comp sales of 2.9% and sales of $3.3 billion, a 4.2% increase, for its fiscal fourth quarter, which ended Feb. 2. Membership fee income was up by 10.7% on record high renewal rates, CEO Chris Baldwin said.

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