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ISSAQUAH, WA-Costco has opened 16 new stores this year en route to reaching the 500-store mark, the company said Thursday in reporting financial results for the first fiscal quarter of 2007 ended Nov. 26. The openings included 12 in the first quarter and four more in the current quarter.

The 12 openings in the first quarter included 12 pharmacies and 12 each of food courts, photo labs and optical centers, along with 11 gas stations, noted Richard Galanti, Costco executive vice president and chief financial officer. Included in the new openings this year was the Nov. 22 opening of the 500th Costco in La Quinta, Galanti pointed out. The company is continuing its ramp-up and expansion in infill markets, the Costco CFO added.

Company officials discussed the financial results during a conference call in which they reported that net income rose 10% to $237 million, or 51 cents per diluted share for the first quarter ended Nov. 26, compared with $216 million or 45 cents per diluted share during the first quarter of fiscal 2006. Net sales increased 9% to $13.85 billion from $12.67 billion during the first quarter, with comparable store sales rising 4%.

“As foreshadowed on our last conference call, gasoline prices hurt our comps in the first quarter,” Galanti said. Lower year-over-year gas prices were one of the culprits. He added that the company’s “strongest department by far has been hard lines,” helped by strong electronics and major appliance sales. Costco’s pharmacy operation comps were “up in the mid single digits,” according to Galantai, as was its prescription business. He noted that Costco has implemented its own $4 generic prescription drug program, matching the competition.

Looking ahead to the second fiscal quarter, Costco expects to record a one-time pretax charge to earnings of approximately $70 million in connection with its stock options program. The charge, which will be approximately $45 million after taxes, will be incurred in the second quarter ending Feb. 18.

Like many if not most other public companies, Costco has reviewed accounting procedures related to stock options issued to executives and employees, and the company said Thursday that it “has approved a program intended to protect more than 1,000 employees who are US taxpayers from certain adverse tax consequences” of those options. A key point of the program involves Costco making payments to employees “to reduce adverse income tax consequences from their options having been granted originally at prices lower than the revised prices.”

Jim Sinegal, president and CEO of Costco, said in a statement that, “We do not intend for our options-holding employees to be penalized for historical issues associated with some of our stock option grants.” Galanti, discussing the options charge during the conference call, said that the company was making the payments so that employees would not have to suffer financial losses from “events beyond their control.”

Costco currently operates 504 warehouses, including 371 in the US and Puerto Rico, 70 in Canada, 19 in the United Kingdom, five in Korea, four in Taiwan, five in Japan and 30 in Mexico. The company also operates Costco Online, an electronic commerce web site.

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