QUOTE AND NEWS
Motley Fool  Sep 28  Comment 
Where do fuel shoppers prefer to refill their tanks? The answer might surprise you.
Canada.com  Sep 26  Comment 
Costco customers, who will no longer be able to use their American Express card in 2015 in the big box store, are being switched to Amex’s SimplyCash card
Motley Fool  Sep 25  Comment 
Wal-Mart and Costco are going in vastly different directions, which means one stands as the better pick for income investors.
TheStreet.com  Sep 25  Comment 
NEW YORK (TheStreet) -- Costco shares are down 0.83% to $126.56 on Thursday afteraJefferiesa reiterated itsa"hold" rating on the stock and raised its price target to $115 from $104. The new price target represents a potential 10.5% upside. ...
Motley Fool  Sep 24  Comment 
As you'll see, the dividend has plenty of room to run. Its stock price on the other hand...
DailyFinance  Sep 24  Comment 
Polaris Industries Inc. (NYSE: PII) announced today that it will partner with the Costco Auto Program (CAP), an auto-buying program specifically for Costco members, as the exclusive promotional partner for its powersports ...
Forbes  Sep 22  Comment 
Consistently, one of the more popular stocks people enter into their stock options watchlist at Stock Options Channel is Costco Wholesale Corp (NASD: COST). So this week we highlight one interesting put contract, and one interesting call contract,...
MarketWatch  Sep 18  Comment 
Costco Wholesale Corp. will drop American Express cards from all its Canadian stores starting next year and is expected to announce a new alternative in the next two weeks.
Forbes  Sep 17  Comment 
By Natalie Burg Lately, few letters have been the subject of more contention in the business world than M, B and A. The same letters that used to brand a job candidate as top tier now have some employers running the other way. Costco doesn't...
SeekingAlpha  Sep 17  Comment 
By Stock Dmitry: Costco Wholesale (NASDAQ:COST) has achieved a steady rise since 2011, doubling in price from the end of 2010 at $60, to the all-time high of $125 in mid-2014. Although Costco does trade at the highest valuation among its...




 

Costco (NASDAQ: COST) is the largest warehouse club retailer and the second largest general retailer in the United States. Costco sells food and general merchandise, including appliances and other household goods, in bulk and at heavily discounted prices. Costco's two main competitors are Sam's Club and BJ's Wholesale Club (BJ), both of which have similar business strategies to Costco.

Costco's business strategy providing items in bulk and at low prices help the retailer maintain positive growth during slow economic times. Price conscious consumers gravitate toward discount retailers like Costco, hoping to get the most out of their money. As a result, Costco's bottom line has fared well since the economic slowdown. Costco's biggest concern is over expansion and cannibalization of existing store locations. As a result, the company has announced it will slow its domestic expansion plans. Costco will instead look to international markets for future growth.

Company Overview

Business Segments

Costco's merchandise categories include:

  • Sundries (23% of Net Sales): Sundries is Costco's largest segment by revenue and includes the sales of candy, snack foods, tobacco, alcoholic and nonalcoholic beverages, and cleaning and institutional supplies.
  • Food (21% of Net Sales): This segment is responsible for the sale of dry and institutionally packaged foods (oatmeal, rice, cereal, etc.) The food segment is Costco's second largest segment.
  • Softlines (10% of Net Sales): Softlines is Costco's smallest business segment and is responsible for the sale of apparel, domestics, jewelry, housewares, media, home furnishings, cameras, and small appliances (toasters, microwaves).
  • Fresh Food (12% of Net Sales): The fresh food segment is responsible for the sale of meat, bakery goods, deli and produce.
  • Ancillary and Other (15% of Net Sales): The ancillary and other business segment is in charge of the company's gas stations, pharmacy, food court, optical, one-hour photo, hearing aid, and travel products.

Business Growth

FY 2010 (ended August 30, 2010)[1]

  • Net sales increased 9.1% to $76.2 billion.
  • Net income increased 20% to $1.3 billion.

Trends and Forces

Mall Strategy Aids Costco's Urban Expansion

The sluggish economy and weak housing market caused many companies, especially department stores, to vacate space in shopping malls. As a result, Costco has stepped in and has been buying up these empty spaces previously occupied by department stores. Although this mall strategy is in contrast to Costco's current strategy of big box retailing in stand-alone stores, Costco stands to benefit from the switch. First, it allows Costco to expand at a quicker rate because the company won't have to worry about setting up infrastructure or have to deal with community opposition in building warehouse stores. Second, it brings Costco's stores to more generally populated areas and to high-traffic areas like malls. So instead of having to drive a long distance to a strip-mall to get Costco's low prices, consumers will now have easier access to the low prices while still being able to shop at other stores under the safe roof. Costco's bottom line stands to benefit from higher traffic and more sales.

Consumers Looking For More Than Just Bulk

Consumers prefer not to have to travel to different places in order to shop. One of the biggest reasons why giant retailers like Wal-Mart (WMT) are successful is because their stores are more than just a place for people to buy food -- these stores provide ancillary services like places to eat or get a hair cut. Many of Costco's stores already provide ancillary services like in-store food service, one-hour photo centers, optical dispensing centers, pharmacies, gas stations, hearing-aid centers, printing/copy centers and car washes. Costco uses these services to attract customers into their stores for more than just buying bulk items and improving on these services will help to increase traffic flow into Costco stores and will help generate sales.

Stands back from the keyboard in amaezemnt! Thanks!

References

  1. COST 2010 10-K, pg. 19
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