Costco to return US$2.2 billion to investors as cash piles up

[LONDON] Costco Wholesale Corp, the largest US warehouse-club chain, plans to return US$2.2 billion to shareholders through the payment of a special dividend after its cash hoard swelled.

The US$5-a-share distribution will be funded from existing cash and additional borrowings, the Issaquah, Washington-based company said Friday in a statement.

The move underscores Costco's success in weathering a shaky retail industry over the past year. Excluding fuel, the company's same-store sales jumped 8 per cent in December, topping the 6.6 per cent gain that analysts had projected.

The amount being returned is about equal to the company's net cash balance as of August 31, the end of its last financial year, according to data compiled by Bloomberg. It's the first such payment by Costco since it handed back US$3 billion to shareholders with a US$7 a share distribution in December 2012.

"Our strong balance sheet and favorable access to the credit markets allow us to provide shareholders with this dividend, while also preserving financial and operational flexibility to grow our business globally," Chief Financial Officer Richard Galanti said in the statement.

Costco shares rose 0.7 per cent to US$141.57 as of 10:26 am in New York. The stock increased 19 per cent in 2014, its sixth straight year of gains.

The special dividend will be paid on February 27 and is in addition to the regular quarterly dividend of 35.5 cents a share that was declared on January 29, Costco said.

BLOOMBERG