Costco Companies, Inc. Announces October Sales Results; Stock Repurchase Program; Change in Accounting Method for Membership Fee Income; and New Online Electronic Commerce Web Site.

ISSAQUAH, Wash.--(BUSINESS WIRE)--Nov. 5, 1998--Costco Companies, Inc. (Nasdaq:COST) today reported net sales of $1.96 billion for the four weeks ended November 1, 1998, an increase of 10 percent from $1.78 billion in the same four-week period of the prior fiscal year. On a comparable warehouse basis, that is warehouses open at least a year, sales increased 7 percent.

For the first nine weeks of its 1999 fiscal year, the September & October reporting months, the Company reported net sales of $4.29 billion, an increase of 11 percent from $3.86 billion during the first nine-week period of the prior fiscal year. Comparable warehouse sales for this year-to-date period increased 8 percent over the prior year's level.

In addition, the Company announced today that its Board of Directors has authorized a stock repurchase program of up to $500 million of Costco Common Stock over the next three years. The Company expects to repurchase shares from time to time in the open market or in private transactions as market conditions warrant. The Company expects to fund stock purchases from cash and short-term investments on hand, as well as from future operating cash flows. The repurchased shares will be held as treasury shares and used for general corporate purposes including stock option grants under stock option programs. As of October 30, 1998, the Company had a total of approximately 218 million shares of common stock issued and outstanding.

The Company also announced that, following discussions with the Securities and Exchange Commission ("SEC"), it has decided to change its method of accounting for membership fee income in anticipation of the issuance in the near future of a new SEC Staff Accounting Bulletin. Based on discussions with the SEC staff, the Company has been informed that the new Staff Accounting Bulletin will require that membership fee income be recognized on a "deferred basis," as opposed to the "cash basis" historically used by the Company and others, which has always been consistent with generally accepted accounting principles and industry practice.

The Company plans to change to the new method in the first quarter of its 1999 fiscal year, the 12 weeks ending November 22, 1998, and expects to record at that time a one-time, non-cash charge of approximately $118 million (after tax) to reflect the cumulative effect of the accounting change as of the beginning of its 1999 fiscal year and assuming that membership fee income is recognized ratably over the one year life of the membership. The SEC has not yet taken a position as to whether ratable recognition over the one year life of the membership is the appropriate method for the Company. The Company anticipates further discussions with the SEC on this topic.

The change to the deferred method of accounting for membership fees is not expected to have a material effect on the Company's financial condition, cash flows or ongoing operating results. For the recently completed fiscal year, under the deferred method (and assuming ratable recognition over the one year life of the membership), reported earnings would have been lower by approximately 3%, while the Company's cash flow would not have been affected at all.

Additionally, the Company commenced operations of its new Costco Online electronic commerce web site. According to President and CEO, Jim Sinegal, "Costco Online brings to our customers an expanded selection of products and services that go beyond the walls of our traditional warehouse club operation. The initial products and services we have selected are all consistent with our primary mission of selecting high-quality, name-brand items at the very best value/price relationship. This philosophy has helped make Costco one of the largest retailers in the world today, supported by over 27 million loyal shopping members."

Examples of products being offered by Costco Online include consumer electronics and cameras; computers and peripherals; office machines; toys and sporting goods; kitchen and housewares; home furnishings; collectibles; and diamonds, watches and other jewelry items. Prices on the approximately 400 products initially being offered range from $40 computer software to a 3.02 carat flawless, colorless, round, brilliant-cut diamond for $91,999.

Initial services being offered through Costco Online, and available to Executive Members of Costco, include discounted consumer services (auto and homeowner insurance; mortgage and real estate services; and residential long-distance telephone services); as well as discounted services for businesses (business credit card processing; employee health care; business checks and forms printing; and business long-distance). Some or all of these services may not yet be available in all markets.

Costco's electronic commerce web site can be viewed at www.costco.com.

Costco currently has 281 warehouses in operation: 213 in the United States (including recent openings in Torrance, California, Christiana, Delaware and the relocation of its San Bernardino, California warehouse), 57 in Canada (including a recent opening in Port Coquitlam, British Columbia), seven in the United Kingdom, three in Korea, and one warehouse in Taiwan. An additional five warehouse openings (including a relocation) are planned for the U.S. and Canada in the Fall, prior to the Christmas holiday season. The Company also operates 14 warehouses in Mexico with a joint venture partner, and plans to open two additional warehouses in Mexico prior to the Christmas holiday season.

Certain statements contained in this news release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For these purposes, forward-looking statements are statements that include words such as "plans," "intends," "expects," "anticipates," "believes," or similar expressions. Such forward-looking statements involve risks and uncertainties that may cause actual events, results or performance to differ materially from those indicated by such statements. These risks and uncertainties include, but are not limited to, domestic and international economic conditions, the effects of competition and regulation, conditions affecting the acquisition, development and ownership or use of real estate, actions of vendors, and the risks identified from time to time in the Company's reports filed with the SEC.