The retail industry has gone through major disruptions lately, and even warehouse giant Costco Wholesale (NASDAQ:COST) hasn't been immune to the difficult conditions. Yet last quarter, Costco said it would implement membership-fee increases as of the beginning of June in an attempt to bolster a key source of revenue, and it hoped that improving conditions in the consumer economy would lead to better shopping results.

Coming into Thursday's fiscal third-quarter financial report, Costco investors had looked for signs of strengthening performance, including accelerated revenue growth and gains on the bottom line. Costco's results delivered more than most had expected to see, and that could bode well for the retailer going forward, as well as it aims to fend off online competition. Let's take a closer look at Costco Wholesale and what its results say about its future.

Costco logo.

Image source: Costco.

Costco gets a much-needed boost

Costco's fiscal third-quarter report was encouraging to those who had been disappointed with recent results. Total revenue jumped nearly 8%, to $28.86 billion, which was even faster than the 7% growth rate that most investors were looking to see. Net income jumped by 28%, to $700 million, and that produced earnings of $1.59 per share. Even when you take out the $0.19 per share positive impact from the company's $7 per share special cash dividend, the adjusted figure was still significantly better than the consensus forecast for $1.31 per share, reversing last quarter's shortfall relative to investor expectations.

Taking a closer look at Costco's numbers, the warehouse retailer saw a nice bounce in comparable-sales figures. For the full period, systemwide comparable sales were up 5%, including a 6% rise in the key U.S. market. Comps in Canada were particularly weak, at 2%, and the other international segment posted a 4% comparable-sales rise. Gasoline prices and foreign-exchange effects had minimal impacts on the geographical segment numbers, but overall, they didn't result in any change to systemwide comparables.

One slight surprise was that membership fee revenue growth didn't pick up in advance of the anticipated fee increase on June 1. Total membership fees collected rose 4%, to $644 million, which was actually a slower pace of growth than in the fiscal second quarter. One might have thought that members would rush in to capture the lower fee before the hike went into effect, but apparently, most shoppers don't think that the $5 to $10 boost is worth worrying about.

Store expansion also was slow at Costco again this quarter. Four new locations opened, with two in the U.S., one in Canada, and the retailer's first location in Iceland. Costco now has 732 stores worldwide.

Can Costco forge ahead?

Costco has a lot of confidence in its ability to remain strong in the future. When the company announced its special dividend payment, which it will pay to shareholders on Friday, May 26, CFO Richard Galanti noted that the move was "our latest step in returning capital to our shareholders." Even with the move and with an 11% boost to its regular quarterly dividend, Costco will retain enough financial flexibility to keep growing and to pursue any strategic initiatives it might decide to implement.

In addition, things with the company's co-branded credit card now appear to be going smoothly. At first, some worried about the transition from American Express (NYSE:AXP) to Citigroup (NYSE:C). But the vast majority of former AmEx cardholders have transferred over to the new offering, and millions of additional cards have been issued under the new program. That likely demonstrates the wisdom of Costco's approach toward maximizing the value of its credit card relationship.

Investors seemed to be happy with Costco's recovery, and the stock climbed between 1% and 2% in after-hours trading immediately following the announcement. The retailer will still have to deal with the ongoing issues it faces in fending off e-commerce specialists and retaining its command of its loyal customer base. However, Costco at least demonstrated its ability to return to a stronger growth trajectory, and that should go a long way toward putting investors at ease about the warehouse giant's long-term prospects.

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