...Costco Wholesale Corporation: Annual Report 2012 Costco’s Annual Report 2012 opens with a description of the corporation’s history of ownership, its subsidiaries, and locations. It also identifies that the company is traded on the NASDAQ under the symbol “COST” (Costco Wholesale Corporation). At the very beginning of the Costco’s 2012 annual report, a financial highlights page which bar-charts depict its performance over five progressive years from 2008 to 2012 in the following categories: Warehouses in Operation; Net Sales; Net Income; Comparable Sales Growth; Membership; Average Sales per Warehouse; and Selling, General and Administrative Expenses which were clearly marked with any variances to the data being compared. The bar charts provided a basis for accounting analysis by depicting intracompany basis of comparison from one year to the next, and using a horizontal analysis approach. An “intracompany” basis of analysis compares an item or financial relationship within a company; a “horizontal analysis,” also called “trend analysis” is a way of evaluating a series of financial statement data over a period of time, with a purpose of determining changes in a company’s financial performance (Weygandt, Kimmel, & Kieso, 2009). Utilizing a means of comparative analysis is essential and significant in analyzing a company’s solvency, liquidity, and profitability. It assists a company’s internal and external stakeholders; its customers, employees; or the government to assess...
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...Costco Wholesale Corporation Costco Wholesale Corporation - Financial and Strategic Analysis Review Reference Code: GDRT28577FSA Publication Date: 10-Oct-2014 Company Snapshot Company Overview Key Information Costco Wholesale Corporation (Costco) is membership warehouses chain operator. The company's product portfolio includes sundries, hardlines, food, softlines, fresh food and ancillary. It offers two types of memberships, namely, business and gold star to its customers. Costco operates gasoline stations in the US and Canada. Costco offers its products online through websites including costco.com in the US and costco.ca in Canada. The company carries out the manufacture of products through Costco Wholesale Industries and operates about 663 warehouses. Geographically, the company operates in various countries including Taiwan, Korea, Mexico, Australia, the UK, Canada and Japan. Costco Wholesale Corporation, Key Information Web Address www.costco.com Financial year-end September Number of Employees 103,000 NASD COST Source : GlobalData Key Ratios Costco Wholesale Corporation, Key Ratios P/E 27.81 EV/EBITDA 18.25 Return on Equity (%) 18.82 SWOT Analysis Debt/Equity 0.48 Costco Wholesale Corporation, SWOT Analysis Strengths Weaknesses Operating profit margin (%) 2.90 Diverse Product Mix Dividend Yield 0.01 Dependence on the North American Market Value-Added Services Note: Above ratios...
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...Overview: Costco was founded by Jim Sinegal and Jeffrey Brotman. Costco opened its first warehouse in Seattle, Washington, on September 15, 1983. Siegal had started in wholesale distribution by working for Sol Price at both FedMart and Price Club. In 1993, Costco merged with Price Club. Costco’s business model and size were similar to those of Price Club. In 1997, PriceCostco changed their name to Costco Wholesale and all the Price Club locations were rebranded to Costco. Costco was the first company in the industry to grow from zero to $3 billion in sales in less than six years. Costco use the competitive strategy the best-cost provider in the wholesale club membership category. Costco has the purchasing power, high sales volumes, quick inventory turnover, and excellent customer service. The chief elements of Costco strategy are pricing, limited product selection and what the company calls “treasure-hunt merchandising, this is high end product that is acquired in the gray market from other wholesalers or distressed retailers looking to get rid of excess or slow-selling inventory. 1. What is Costco’s business model? Is the company’s business model appealing? Why or why not? The business model that Costco employs is that they are able to provide quality goods and services at the lowest possible prices. This business model is appealing as it firstly, allows Costco to generate high sales volume and rapid inventory turnover by offering members very low prices and select private-label...
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...Overview Margarita Torres Costco member and shareholder Evaluating Costco’s financial performance Evaluation methods Common-size statements Sustainable growth model Benchmarking ratios Retail Industry $1.6 trillion in retail and wholesale trade (2001) 15% of GDP (1960) 16% of GDP (2001) Department stores Customer service premium Many SKUs Discount stores Low prices No frills Retail Industry Wholesale clubs Membership only Volume discounts Limited SKUs Online stores Convenience Low overhead Sears, Roebuck, & Company Founded 1893 First retail store opened in 1925 $41 billion in sales (2001) 2,185 stores Wal-Mart / SAM’S Club Founded 1962 First SAM’S Club opened in 1983 $218 billion in sales (2001) 4, 189 stores 528 SAM’S Clubs 39 million members (SAM’S Club) Concentrated in the South BJ’s Wholesale Founded 1984 $5 billion in sales (2001) 130 stores 6.7 million members Concentrated in the Northeast Costco Wholesale Corporation Founded in 1983 Merged with Price Club in 1993 $34 billion in sales (2001) 365 stores 17.1 million members Concentrated in the West Costco Wholesale Corporation Target markets Middle class customers Small businesses Mark up limited to 14% Kirkland Signature store brand Brand name quality at discount prices Efficient operations Common-size Statements Absolute amounts vs. relative ratios / percentages Trends Where are funds allocated? How efficient is the business? Benchmarking Comparisons between businesses Sustainable Growth Model Step 1: Profitability and...
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...American Warehouse Clubs: Costco Wholesale Club vs. BJ’s Wholesale Overview Costco and BJ’s are both wholesale stores. They offer a variety of products sold in case lots, furniture, food, household products, clothing, books, DVD’s, and many other bulk products. They limit their products to brand names and store product names. They offer bulk items at a lower cost than a typical grocery store. They are kept in warehouse stores which cost the companies less with cheaper shelving and store lighting fixtures. Low operating costs allows these wholesalers to charge much lower prices. These warehouses are very attractive for business owners, caterers and non profit organizations. They can get their products of greater quantity at a much lower cost. There are more than 1250n warehouses in Mexico, Canada and the U.S. 56% percent of them alone are in the United States. These warehouses have competed with Kohl’s, Target, Office Depot, Best Buy and Wal-Mart to name a few. The first warehouse was introduced by Sol Price in San Diego California in 1976. They lost money in their first year of operation but by 1979 had 2 stores. Before then they experimented with a retailer called Fed-Mart. Jim Sinegal who is the cofounder and CEO of Costco worked for Fed-Mart as a teenager. When Sinegal was 26 Sol Price made him the manager of the original store in San Diego. The first Costco store opened in 1983 the same year Sam’ Club opened. By 1984 there were 9 Costco stores with 200,000 members...
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...Clubs: Costco Wholesale vs. Sam’s Club vs. BJ’s Wholesale Tami Bouldin-Golt March 1, 2013 Provide an overview of the company and/or industry and add any pertinent information relevant to the case (5 points) From eggs to tires to coffee, the everyday consumer can find whatever he or she needs in a warehouse club; at a much lower price from the common retailer the drawback: annual membership fee. The warehouse industry operates on the idea that by customers buying memberships to shop at their locations, the companies can afford to lower their prices beyond that of major retailers. The idea of having a membership to shop somewhere not only allows the company to lower prices but also creates a loyal customer base that tends to come back year after year. There are three major competitors in this industry, Costco Wholesale Corporation, Sam’s Club (a subsidiary of Wal-Mart), and BJs Wholesale club. Costco and Sam’s Club opened in 1983 to immediate success. By the end of 1984, Costco had nine stores and over 200,000 members and became the first company to reach over $1 billion in sales within the first six years. Sam’s Club had sales in excess of $12.3 billion within 10 years. Both companies rely on a low-cost strategy. B J’s is considerably smaller than Costco and Sam’s club but has still maintained success behind a best cost strategy. While BJs has fewer locations, their stores offer over 7,000 products compared to 4,000 at both Costco and Sam’s...
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...Competition Among the North American Warehouse Clubs: Costco Wholesale vs. Sam’s Club vs. BJ’s Wholesale 11/1/2013 Provide an overview of the company and/or industry and add any pertinent information relevant to the case (5 points) The Warehouse club retail industry was first started back in 1976. It currently consists of 3 main players: Costco Wholesale, Sam's Club and BJ's Wholesale club. These no frill, big box retailers offer discounted merchandise including such items as food, clothing, household goods, cleaning supplies, office supplies books, DVD's and some furniture. Items sold are usually in larger packages than offered in other retail stores. Warehouse clubs attract consumers such as families, businesses, churches and other organizations. It is hard for other retailers such as supermarkets, department store,. office supply stores, along with others to compete with wholesale club pricing. Clubs are able to keep pricing low due to bulk purchasing along with no frill overhead and low labor costs. . 1. Do all three warehouse club rivals – Costco, Sam’s, and BJ’s Wholesale – have highly similar strategies? What differences in their strategies are apparent? Does one rival have a better strategy that the others? Does one rival have a somewhat weaker strategy than the other two? (15 points) All three warehouse club rivals have some similar strategies. All practice the low cost provider strategy Their strategies are to offer...
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...INTERNATIONAL BUSINESSMBA 5011 BOARD APPROVAL DOCUMENT FOR COMPANY EXPANSION IN THE INTERNATIONAL MARKET | | | | | | | Dated: AUGUST 11, 2013 Table of Contents 1.0 Introduction4 2.0 Objectives5 3.0 Company Overview6 3.1 Targeted Company Overview…………………………………………………………………………………………………………….7 4.0 Market Situation8 4.1 Local Market Situation……………………………………………………………………………………………………………………….8 4.2 International Market Situation…………………………………………………………………………………………………………..9 4.3Overview of Canada9 5.0 Market Assumptions………………………………………………………………………………………………………………………..10 6.0 SWOT Analysis…………………………………………………………………………………………………………………………………11 7.0 Target Market Needs……………………………………………………………………………………………………………………….12 7.1 Selected Products…………………………………………………………………………………………………………………………….12 7.2 Product feature……………………………………………………………………………………………………………………………….13 7.3 Product Packaging…………………………………………………………………………………………………………………………..13 7.4 Product Launch……………………………………………………………………………………………………………………………….13 7.5 Legal Considerations…………………………………………………………………………………………………………..……….…15 8.0Market Entry Strategy…………………………………………………………………………………………………………………….16 8.1 Types of Risks…………………………………..…………………………………………………………………………………………...18 8.2 Competitive Advantage………………………………………………………………………………………………………………...
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...Performance Analysis of Costco Wholesale Corporation xxxx Strayer University FIN 534: Financial Management Professor: xxxx June 11, 2012 Costco Wholesale Corporation Higher interest rates, levels of unemployment, consumer debt levels, and unsettled financial markets are general economic factors that can adversely affect the company’s financial performance. These key elements play an important role in how a company chooses to move forward operationally and financially. Therefore, it’s imperative that we as investors understand a company’s business strategy as well as have a general knowledge of issues which may impact their decisions. Prior to investing, we should review a company’s operations, stock price, and their ratios to decide if a firm a financially stable to meet their obligations. Company Overview Costco Wholesale Corporation and its subsidiaries (Costco) began operations on September 15, 1983 in Seattle, Washington. James Sinegal and Jeffery Brotman founded it. In October 1993, Costco merged with The Price Company, which established the membership warehouse model, to form Price/Costco, Inc. In January1997, the company changed its name to Costco Wholesale and all Price Club locations were rebranded as Costco Companies, Inc. August 30, 1999, the company was reincorporated and its name was changed to Costco Wholesale Corporation. To date, the company has grown to become the largest warehouse club retailer and the second largest general retailer...
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...Financial Research Paper for Costco Company Overview for Costco Costco Wholesale Corporation operates affiliation warehouses that provide an assortment of exclusive and secluded label products in a variety of stock categories in no-frills, self-service warehouse facilities. The organizations product categories include candy, snack foods, tobacco, alcoholic and non-alcoholic beverages, and cleaning and institutional supplies; appliances, electronics, health and beauty aids, hardware, office supplies, garden and patio, sporting goods, furniture, and automotive supplies; dry and institutionally packaged foods; apparel, domestics, jewelry, housewares, media, home furnishings, cameras, and small appliances; meat, bakery, deli, and produce; and gas stations, pharmacy, food court, optical, one-hour photo, hearing aid, and travel. It offers Business and Gold Star (individual) memberships. As of October 8, 2009, the corporation operated a chain of 560 warehouses encompassing 407 in 40 states and Puerto Rico, 77 in Canada, 21 in the United Kingdom, 7 in Korea, 6 in Taiwan, and 9 in Japan, as well as 32 warehouses in Mexico and 1 in Australia. Costco Wholesale Corporation also propositions its products through costco.com in the U.S. and through costco.ca in Canada. It has a strategic alliance with Valdez Heli-Camps. The company, formerly known as Costco Companies, Inc., was founded in 1976 and is based in Issaquah, Washington. The company’s premier membership is the executive...
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...HBS Case Study 2: Costco Wholesale Corporation Financial Statement Analysis (A) Lee Hathaway MMS 185: Managerial Finance Professor Veraldi September 27, 2007 It is important for stockholders to continuously re-evaluate their investments. Although some investors do this more frequently and thoroughly than others, the majority of shareholders do so at least once each year. Therefore, Torres’ desire to update her analysis in order to determine whether Costco was still operating efficiently makes perfect sense. After thorough examination, my analysis proves that Costco remains one of the industry’s leading competitors and there seems to be no reason for Torres to sell her shares as long as she wishes to retain holdings of a retail wholesale club in her portfolio. The common-size financial statements evaluating the period 1997-2001 (exhibit 9) reveal valuable information regarding Costco. Torres noticed that there were two revenue lines: net sale of goods and membership fees. She decided to use net sales of goods as the point of comparison and express other line items, including membership fees, as a percentage of net sales in order to allow for a clearer reflection of gross and operating margins. This format enabled her to analyze the profit and asset structures of Costco over time. To begin, Margarita Torres’ common-size financial statements for Costco demonstrate a rise in membership fees and other sources of revenue from 1.82% in 1997 to 1.93% in 2001...
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...Executive Summary Costco is one of the most profitable retail stores in the United States at the moment. This is in spite of the prevailing tough global economic times and stiff competition from stores such as Wal-Mart and Target. Costco, a members’ wholesale retail store, was founded in 1983 in Washington by Jeffrey Brotman, who serves as the current Chairman of the board of directors and James Sinegal, the current company president. Costco has not been spared by the current global economic conditions. They have affected it in a number of ways that have made the company’s management respond in a manner that is meant to ensure that the business not only survives but grows even stronger. First, Costco has taken strong measures to keep enough employee numbers. Customers are better served by employees who are in good health. Employees are not going to be in good health if they work long hours and cannot visit a doctor when sick. Costco employees work normal hours since there are enough employees to serve the company’s customers. While other stores such as Wal-Mart have seen it fit to downsize their workforces, Costco has moved to ensure that employees are of the right numbers all over its stores within and without the United States. Secondly, the current tough global economic conditions have driven Costco into extending good salaries to its employees. The good compensation has ensured that employees are well motivated and ready to serve customers in a better manner. As counter...
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...Costco Wholesale Corporation | Table of Contents The Problem and Assumptions 2 The Problem 2 Assumptions 2 Qualitative Analysis 2 Quantitative Analysis 3 Industry Trends 3 Costco Strategy Expansion 3 Income Statement Industry/Competitor Comparison 3 Balance Sheet Competitor/Industry Comparison 5 Common-Size Analysis 6 Ratio Analysis 6 Statement of Cash Flow 9 Preferred Action Plan with Alternative Actions 11 The Problem and Assumptions The Problem Margarita Torres purchased shares in Costco Wholesale Corporation in 1997 and now it is 2002. She has decided to analyze her investment to see if Costco will continue to be profitable at a sustainable growth rate. The main question she needs to answer is how the company had been affected by growth. Had its operational efficiency changed? And how had it financed the growth and how its capital structure evolved? Assumptions For the year 2001 a recession occurred. This occurrence is considered when reviewing the financial numbers and statistics during this year. Qualitative Analysis The first step in analyzing Costco Wholesale Corporation is analyzing the relative qualitative data. Based on the data provided within the case the points below summarize how Costco is performing: * Industry: Wholesale clubs grew 12-15% in the 1990s and Costco is currently the largest wholesale club in the industry. * Strategy: Costco targets wealthier clientele of small business owners and middle...
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...Economic * High potential for growth in economy. * Significant Difference in income levels between rich and poor. * Abundance of workforce. * Untapped market. | Relative Importance | With reference to Essential Business Requirement of COSTCO, we evaluated the significance of the four factors: * Culture *** | * Administrative **** | * Geographic **** | * Economic ** | {key: (****-Most significant) - (*- Least Significant)} | Business Challenges | * Culture * Nigeria has local informal retail shopping market. Significant difference in culture (high context). * Variety of people from different cultures, challenge to please each one. * Administrative * It has an inefficient property registration system. * Government has restrictive trade policies. * Geographic * Inadequate infrastructure. Difficult to reach out to rural customers. * Economic * Regional disparity affects target customers. * Presence of a rival (Shoprite) with a developed distribution network. | Business Opportunities | * Culture * Cultural Similarity with other African countries. If successful in Nigeria, company can expand further in Africa’s untapped market. * Live in large families so its beneficial for Costco wholesale model. * Administrative * Government is investing heavily on improving the infrastructure....
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...Costco Pharmacy POM Audit Team 7 Executive Summary Design of Goods and Services- Costco can be seen to be in their maturity stages of their life. Therefore, it is recommended for Costco to expand its Pharmacy department by at least 50%. Process Design-Costco processes prescriptions and provides the prescribed drugs to customers. For each prescription, pharmacists carefully review the dosage along with other drugs you may be taking in order to prevent any chance of medications interacting with each other. They also ensure you do not receive any medication which could result in an allergic reaction. It is recommended to introduce E-prescribing in the near future as it would reduce the duration for each prescription process. Layout-The Costco Pharmacy Layout can be defined as a Retail Layout. The main objective of a retail layout is to maximize profitability per square foot of floor space. However further research will need to be conducted to make a recommendation Capacity- Even though the pharmacy department is not operating at 100% efficiency, it is still using and managing their facilities effectively, operating at 72% efficiency on a daily basis. However, future capacity planning is required as the efficiency capacity is increasing as population grows. Productivity- The labor productivity is currently5 units per labor hours while the multifactor productivity is 0.040 units per dollar. After auditing Costco’s productivity it was found that Costco should aim to increase...
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