Costco's first-quarter profit climbs 10 percent

Costco, the nation's largest wholesale club operator, said today Thusday its first-quarter profit rose 10 percent and said it would take a second-quarter charge related to stock- option grants. Costco shares closed up nearly 2 percent.

For the quarter ended Nov. 26, net income totaled $236.9 million, or 51 cents a share, compared with $215.8 million, or 45 cents ashare, a year ago. Revenue climbed 9 percent to $14.15 billion from $12.93 billion last year.

Analysts polled by Thomson Financial were looking for earnings of 50 cents a share on sales of $14.06 billion.

Costco Wholesale shares rose 97 cents, or about 1.8 percent, to close at $54.11.

Sales at stores open at least a year, a key industry gauge, rose 4 percent.

In connection with its review of stock-option grants, Costco said it will increase the exercise price on certain options granted from 2000 to 2003 and make payments to employees to cover new taxes that may occur.

As a result, the company expects a one-time second-quarter charge of $45 million. The program is expected to cover about 1,000 U.S. employees.

"We do not intend for our options-holding employees to be penalized for historical issues associated with some of our stock-option grants," President and Chief Executive Jim Sinegal said in a statement. Craig Jelinek, the chief operating officer for merchandising, will be paid about $337,000 under the options-dating program. Joseph Portera, the COO for eastern and Canadian divisions, will be paid about $107,000, the company said.

In October, Costco said an internal committee and independent experts reviewing the company's stock-option grant practices found no evidence of fraud, but did find "imprecisions" related to certain grants.

Costco has said Sinegal and Chief Financial Officer Richard Galanti would not receive 2006 bonuses due to their responsibility for those option grants.