updated 10/12/2006 8:12:22 AM ET 2006-10-12T12:12:22

Costco Wholesale Corp., the nation’s largest wholesale club operator, said Thursday fourth-quarter earnings edged up 1 percent, driven by a 19 percent revenue increase, an unexpectedly strong operating performance late in the quarter and lower-than-expected workers’ compensation costs.

Net income grew to $355.6 million, or 75 cents per share, for the three months ended Sept. 3 from $354.7 million, or 73 cents per share, a year ago. The year-ago period included one less week, as well as several one-time items. Excluding items, the company earned 66 cents per share in the 2005 quarter.

Revenue including sales and membership fees increased $19.9 billion from $16.7 billion last year. Same-store sales, or sales at warehouses open at least a year, increased 8 percent.

The results topped analysts’ revised consensus estimates for profit of 73 cents per share, according to a poll by Thomson Financial.

In August, the company lowered its forecast for the fourth quarter, because markdowns on expensive items like furniture and big-screen televisions eroded gross profit margins.

“Several factors enabled earnings results to be better than we anticipated six weeks ago — recognition of income tax benefits in connection with previously established reserves, which more than offset a $14 million income tax charge; stronger-than-planned operating results in the final five weeks of the quarter; improved gasoline profitability in the final week of the quarter; and lower-than-expected costs related to workers’ compensation and other expense accruals,” said Richard Galanti, chief financial officer.

Net income for fiscal 2006 increased to $1.10 billion, or $2.30 per share, from $1.06 billion, or $2.18 per share, a year ago. Revenue rose to $60.2 billion from $53 billion.

Costco currently operates 488 warehouses, including 359 in the United States and Puerto Rico, 68 in Canada, 18 in the United Kingdom, five in Korea, four in Taiwan, five in Japan and 29 in Mexico.

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