Costco Wholesale Corporation Reports Second Quarter and Year-to-Date Operating Results for Fiscal 2006 and February Sales Results

Net sales for the second quarter of fiscal 2006 increased 11% to$13.78 billion from $12.41 billion during the second quarter of fiscal2005. Net income for the second quarter of fiscal 2006 was $296.2million, or $.62 per diluted share, compared to $305.5 million, or$.62 per diluted share, during the second quarter of fiscal 2005.

Net income during last year's fiscal 2005 second quarter waspositively impacted by a one-time $52.1 million income tax benefit,resulting primarily from the settlement of a transfer pricing disputebetween the United States and Canada (covering the years 1996-2003).Additionally, during last year's second quarter the Company adjustedits method of accounting for leases (entered into over the past twentyyears), primarily related to ground leases at certain owned warehouselocations that did not require rental payments during the period ofconstruction, and recorded a cumulative pre-tax, non-cash charge of$16.0 million ($10.0 million after-tax) as a preopening expense.Without these charges net income for the second quarter of fiscal 2005would have been $263.4 million or $.54 per diluted share. The currentquarter's reported earnings per share of $.62 represents a 15%increase over the prior year's adjusted earnings per share of $.54.

Net sales for the first half of fiscal 2006 increased 11% to$26.45 billion from $23.75 billion during the first half of fiscal2005. Net income for the first half of fiscal 2006 increased 3% to$512.0 million, or $1.06 per diluted share, compared to net income forthe first half of fiscal 2005 of $498.6 million, or $1.02 per dilutedshare. Without the impact of the prior year's second quarter taxbenefit and the cumulative charge to preopening expenses (above), netincome for the first half of fiscal 2005 would have been $456.5million, or $.94 per diluted share. Reported earnings of $1.06 perdiluted share for the first half of fiscal 2006 represents a 13%increase over the prior year's adjusted earnings per share of $.94.

Comparable sales for the fiscal second quarter (12 weeks) andfiscal first half (24 weeks) of fiscal 2006, both ended February 12,2006, were as follows:
12 Weeks 24 Weeks
----------- -----------
US 7% 8%
International 10% 10%

Total Company 7% 8%
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The Company today also reported net sales of $4.21 billion for thefour-week retail reporting month of February, the four weeks endedFebruary 26, 2006, an increase of 11% from $3.78 billion in the samefour-week period of the prior fiscal year. For the six-month retailreporting period of September through February, the twenty-six weeksended February 26, 2006, which includes the first two weeks of theCompany's fiscal third quarter, the Company reported net sales of$28.55 billion, an increase of 11% from $25.62 billion during thecomparable period of the prior fiscal year.

Comparable sales for the 4-week retail-reporting month of Februaryand the 26-week retail-reporting period of September through Februaryare as follows:
4 26
Weeks Weeks
----------- ----------
US 7% 8%
International 11% 9%

Total Company 8% 8%
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Costco currently operates 471 warehouses, including 346 in theUnited States and Puerto Rico, 66 in Canada, 17 in the United Kingdom,five in Korea, four in Taiwan, five in Japan and 28 in Mexico. TheCompany also operates Costco Online, an electronic commerce web site,at www.costco.com and at www.costco.ca in Canada. The Company plans toopen an additional 18 to 20 new warehouses, including the relocationof two to three warehouses to larger and better-located facilities,prior to the end of its 53-week 2006 fiscal year ending on September3, 2006.

A conference call to discuss these second quarter results isscheduled for 8:00 a.m. (PT) today, March 2, 2006, and is availablevia a webcast on www.costco.com (click on Investor Relations and"Webcasts").

Certain statements contained in this document constituteforward-looking statements within the meaning of the PrivateSecurities Litigation Reform Act of 1995. For these purposes,forward-looking statements are statements that address activities,events, conditions or developments that the Company expects oranticipates may occur in the future. Such forward-looking statementsinvolve risks and uncertainties that may cause actual events, resultsor performance to differ materially from those indicated by suchstatements. These risks and uncertainties include, but are not limitedto, domestic and international economic conditions including exchangerates, the effects of competition and regulation, consumer and smallbusiness spending patterns and debt levels, conditions affecting theacquisition, development, ownership or use of real estate, actions ofvendors, rising costs associated with employees (including health careand workers' compensation costs), rising costs associated with theacquisition of merchandise (including the direct and indirect effectsof the rising cost of petroleum-based products and fuel and energycosts), geopolitical conditions and other risks identified from timeto time in the Company's public statements and reports filed with theSecurities and Exchange Commission.
COSTCO WHOLESALE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(unaudited)

12 Weeks Ended 24 Weeks Ended
------------------------- -------------------------
February 12, February 13, February 12, February 13,
2006 2005 2006 2005
------------ ------------ ------------ ------------

REVENUE
Net sales $13,784,810 $12,412,578 $26,449,609 $23,752,522
Membership fees 269,766 245,499 532,320 483,558
------------ ------------ ------------ ------------
Total revenue 14,054,576 12,658,077 26,981,929 24,236,080
OPERATING EXPENSES
Merchandise costs 12,303,850 11,056,064 23,634,021 21,188,551
Selling, general
and administrative 1,313,368 1,185,122 2,571,467 2,316,808
Preopening expenses 4,614 22,996 16,991 33,381
Provision for
impaired assets
and closing
costs, net 1,428 4,000 2,639 6,800
------------ ------------ ------------ ------------
Operating income 431,316 389,895 756,811 690,540
OTHER INCOME (EXPENSE)
Interest expense (2,923) (8,980) (6,647) (18,622)
Interest income
and other 35,225 24,779 60,765 40,369
------------ ------------ ------------ ------------
INCOME BEFORE
INCOME TAXES 463,618 405,694 810,929 712,287
Provision for
income taxes 167,415 100,242 298,908 213,682
------------ ------------ ------------ ------------
NET INCOME $ 296,203 $ 305,452 $ 512,021 $ 498,605
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NET INCOME PER
COMMON SHARE:
Basic $ 0.63 $ 0.64 $ 1.08 $ 1.06
============ ============ ============ ============
Diluted $ 0.62 $ 0.62 $ 1.06 $ 1.02
============ ============ ============ ============

Shares used in
calculation (000's)
Basic 471,889 474,221 472,282 470,034
Diluted 482,127 493,700 484,294 491,714

Dividends per
share $ 0.115 $ 0.10 $ 0.23 $ 0.20