...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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...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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...Case Study Analysis 1: Costco Wholesale Corp: Mission, Business Model and Strategy MGMT 670: Strategic Management Capstone June 26, 2011 Business Case Study: Costco Wholesale Corporation Introduction As a student in MGMT 670: Strategic Management, the capstone course for the Management track at the University of Maryland University College, I was asked to prepare a case study analysis of Costco Wholesale Corporation. Costco is one of the world’s leading wholesale retailers with annual sales of $76.3 Billion for fiscal year (FY) 2010, which is an increase of 9% from the previous year ($69.9 billion). In addition, its earnings per share increased to $2.92, an annual increase of 18% from the previous year. (Costco Financial Report, 2011) This increase is an all time high for the company thereby solidifying its place as a leader in the wholesale industry. Costco and its Business Strategy From inception, Costco’s business strategy has been to offer limited products (4000) at lower prices coupled with great values while keeping overhead costs low. In its main product line Costco has about 3,000 products that are present in the stores at all times and 1000 products that are ever-changing. These 1000 lines allow Costco buyers/merchandisers to hunt for items that will keep customers coming back to see what is new or fresh in the stores. These items help Costco create the “treasure hunt” environment that will keep customers coming back to the store more frequently. The motivation...
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...Annual Report Analysis Costco Wholesale Accounting 305 Table of Contents Introduction………………………………………………………………………………………………………2 The firm’s auditors and their opinion on the financial statements……………………………………………….2 The subsequent events, errors and irregularities, illegal acts, or related-party transactions……………………...3 that have a material effect on the financial statements were none……………………………………………......3 The trend in total assets and total liabilities for the years presented…………………………………………...…3,4 The company’s three largest assets for the most recent year presented……………………………………….…..4 The company’s three largest liabilities for the most recent year presented……………………………………….4 The types of stock the company has and the outstanding shares for each type of stock for the most recent year presented………………………………………………………………………………...4 The company use of multiple-step income statement……………………………………………………………..5 The income statement with no discontinued operations or extraordinary items, in any year presented…………..5 The trend in net income over the years presented……………………………………………………………....….5 The company has no comprehensive income reported……………………………………………………………6 The company use of indirect cash-flow statement method………………………………………………………..6 The trend in cash from operations for the years presented…………………………………………………………6 The two largest items included in cash from investing activities…………………………………………………..7 Conclusion…………………………………………………………………………………………………………...
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...Business Analysis Part III: Costco Wholesale Corporation MGT/521 June 14, 2012 Business Analysis Part III: Costco Wholesale Corporation Jim Sinegal, Costco Wholesale cofounder and CEO summed up Costco Wholesale Corporations strategic planning and operations in a nutshell according to the Retail Industry website, “Wall Street is in the business of making money between now and next Tuesday. We’re in the business of building an organization, an institution that we hope will be here 50 years from the now. Strategic planning is an important part of running any business and the more so for businesses that operating in multiple states and countries.” On May 27, 2012, Costco Wholesale Corporation reported sales that covered a period of thirty-nine weeks. The Corporation reported “net sales of $7.67 billion for the month of May, the four weeks ended in May 27, 2012, an increase of 7% from $7.14 billion during the similar period last year” (Bloomberg BusinessWeek, 2012). The company reported net sales ending in a thirty-nine week period of $71.28 billion, “an increase of 10% from $64.75 billion during the similar period last year” (Bloomberg BusinessWeek, 2012). Many may wonder why Costco Wholesale Corporation is the leading wholesale business in the industry. To provide a good understanding of why Costco Wholesale Corporation is the leading warehouse distributor in the industry, this paper will help provide understanding by discussing strategic initiatives of the corporation and how...
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...ENVIRONMENTAL FACTORS Environmental Factors on Marketing Decisions of Costco Wholesale Corporation Environmental factors are made up of all the factors and activities that have a significant effect on managing a business. These factors have a strong influence on operating any business, particularly in marketing options (Pagell & Halperin, 2000). Environmental factors cause risks to the achievements of any business and to deal with these factors, a firm must improve its main skills and create good methods (Staff, 2009). There are different components that would have a great impact on these latest services provided by the firm. After acknowledging these components, the firm must create a strategy. In his book, David jobber explains that with the support of this observation, the business becomes more successful in applying the different methods (Jobber, 2001). One of the major organizations in the trade business is Costco Wholesale Corporation; this company was established by James Sinegal and Jeffrey Brotman (Costco Wholesale Corporation, 2009). On the start of the sales volume, the business is regarded to be among the world's major membership warehouses (Costco: About Company, 2009). This corporation has the rank of one of the 5 biggest businesses in the U.S. in retail industry. Issaquah (Washington) is where the H.Q. of the corporation is located in the U.S. (Costco Wholesale Corporation Reports January Sales Results and Comments on Earnings Outlook for Its...
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...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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...Strategic Plan for Costco Wholesale Corporation Executive Summary The retail industry is an extremely competitive environment that poses many challenges for Costco Wholesale Corporation and its competitors. Since many of the stores offer the same products, it may sometimes be very hard for customers to differentiate between retail stores. Even though the economy is recovering from a recession, the retail business is still a mature industry and is improving very steadily. Costco and its competitors are affected by the same political, economic, social, and technological factors, such as taxes, presidential elections, SEC regulations, the economic state of the country, exchange rates, various social characteristics, such as customer age, income and family size, and the growth of e-commerce. All of these external factors have a great influence on how Costco conducts their operations. Costco is a premier leader in the retail industry thanks to their strategic pricing strategy, low cost operating system, and financial stability. Costco is still vulnerable to numerous threats, such as competition, exchange rates fluctuations, increasing labor and healthcare costs, and high exposure to low growth markets. If Costco is to maintain the market share in the retail industry, they should consider the options of offering more customer service in their warehouses, increase online retail sales, and acquire other retail stores for expansion and growth. Finally, if Costco wants to become...
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...COSTCO WHOLESALE CORPORATION FINANCIAL STATEMENT ANALYSIS The important thing for stockholders is to review their investments on regular basis. So Margarita Torres wants to reconsider her analysis determine If Costco was still operating efficiently. There are some reasons why Torres should keep her investment and should continue to maintain her investment in Costco. * Year over year, Costco Wholesale Corporation has been able to grow revenues from $71.4B to $77.9B. The company has been able to reduce the percentage of sales devoted to selling, general and administrative costs from 10.21% to 10.09%. This was a driver that led to a bottom line growth from $1.1B to $1.3B. Costco provides high sustainable growth through high return on equity and reinvestment on earnings. * Costco has operating efficiency . They provide that with high return on assets, high inventory turnover and lower operating expenses than competitors. * Costco has high value creation. There are some reasons why Torres should reconsider her investment and should not continue to maintain her investment in Costco. * Costco has approximately 1 on debit/equity ratio. This can result volatile earnings as a result of the additional interest expense . * Costco has low market matrix In conclusions, Torres should continue to support her investment in Costco. Due to maintaining low margins by selling items in bulk, keeping operating expenses to a minimum, and turning inventory over rapidly...
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...merchandise that include a mix of across the country branded and illicit private-label products in an exceedingly wide selection of merchandise classes. This is an awfully appealing business model because it provides the power to control fruitfully at a lot of lower profit margin by securing marketer volume getting agreements, economical distribution, no-frill self-service warehouse facilities and supplemental membership fee revenue. Another magnet is because of the high sales volume and fast inventory turnover style of this business model, the accelerated money conversion cycle permissible Costco to gather the funds for inventory before marketer liabilities changing into due. This provided for marketer finance and also the ability to require advantage of early payment discounts that additional reduced operational prices. As a testament to the success of this business model, from 2008 through 2011, Costco was able to increase the amount of warehouses by 15.6%, revenues by 22.6%, and earnings by 14.0%. 2. What are the chief elements of Costco’s current strategy and is it effective? Costco’s...
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...Thinking Submitted to: Ron Steffel Submitted by: Georgette McIntosh N01 Xie Luxuan Dorquidia Alemany Date of Submission: May 3, 2015 Title of Assignment: Costco Case Study CERTIFICATION OF AUTHORSHIP: I certify that I am the author of this paper and that any assistance I received in its preparation is fully acknowledge and disclosed in the paper. I have also cited any sources from which I used data, ideas of words, whether quoted directly or paraphrased. I also certify that this paper was prepared by me specifically for this course. Student Signature: Georgette McIntosh ******************************************* Instructor’s Grade on Assignment: Instructor’s Comments: EXECUTIVE SUMMARY he purpose of this report was to examine the implications on employees motivations used at Costco Wholesale Corporation. Research for this report included a review of he purpose of this report was to examine the implications on employees motivations A. Problem Statement: State the main problem facing the firm (or industry) in one, succinct sentence. B. Analysis: Summarize the main findings of your analysis. You may use bullet points, bold, italics – any means to convey and highlight the key factors you have determined based on your analysis. C. Alternatives: State briefly (one sentence or a bullet point each) 2 or 3 alternative courses of action that could be implemented D. Recommendation: Choose one course of action...
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...Costco case study and strategic analysis Costco Wholesale Corporation (Costco), one among the few largest wholesaler giant differentiates itself applying unique strategies relating to production and operations, and marketing which make it stand out from the rest of the retailers who are also said to be competitive in the retailing and wholesaling business globally. Costco is one of the innovative wholesalers teamed by very dynamic management team and dedicated, motivated and satisfied workforce with the mission “to continually provide its members the best quality products at the lowest possible prices” (Costco Annual Report 2006). Some of the fundamental principle of the Costco is that they obey the law, they take care of their members, they take care of their employees, they respect their suppliers, and finally they reward their shareholders. Some of the reasons how Costco can serve those highest quality goods of national brands for the lowest possible prices is that they eliminate different cost associated with delivery expenditures, account receivable, inventory, sales people, and fancy buildings. And they successfully operate themselves in the competitive environment serving not only an individual customers but also a legal customers (a company), and small business customers. Costco believe that society and the community is one of the key factors of their success. Therefore, they are willing to give back to their community and the society in terms of quality goods in...
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...COMPANY BACKGROUND Costco was founded by Jim Sinegal and Seattle entrepreneur Jeff Brotman. Operation of the first store of Costco began in 1983. There were nine Costco stores in five states by end of 1984. Costco became a public company for raising additional fund for business expansion in December 1985.Costco successful to reach one billion dollar in sales in less than six years which make the company the first ever United States (U.S) that reach that huge amount of sales. Costco merge with Price Club in year 1993 and came out with name of PriceCostco. Later, the name was changed to Costco Wholesale Corporation in August 1999.This warehouse club chain have 57 million members. It sales volumes only based on its members as it only open to their members and guests. Costco is the fourth largest retailer in the US and is the seventh largest in the world. Currently, Costco holding market share or in other words industry standing of US and Canada is about 55% . Whereas its close competitor Sam's Club market share is about 36% and 9% by BJ’s Wholesale Club. Costco offer tremendously lower price products with good quality and branded name. The price which are offer by Costco much lower compare to other conventional wholesale or retail that sell similar items and products. Profit generated by the company from its membership fees is about one billion with E- commerce sales contributing about five hundred and thirty four million. It was estimated that the renewal rate of the card...
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...Financial Analysis of Costco Wholesale Corp. Costco Wholesale Corporation (Costco) is a publicly traded company based on the concept that offers, members, low prices on a limited selection of nationally branded and select private-label products in a wide range of merchant categories. It operates warehouses in the U.S., Canada, the United Kingdom, Japan and Australia and through majority-owned subsidiaries in Taiwan and Korea. The company warehouses present exclusive products which include appliances, auto tires, clothing and accessories, computers and electronics goods, grocery, furniture, health and beauty, home and décor, office products, fitness and sports, travel and luggage. Costco provide ancillary services that include gas stations, pharmacy food courts, optical dispensing centers, hearing aid centers, photo processing centers. Costco was ranked 19th and 18th by Fortune 500 in 2013 and 2014 respectively. Major competitors are Sam’s Club (Wal-Mart Stores Inc.) and BJ’s Wholesale club, Inc. Costco was founded by James D. Sinegal and Jeffrey H. Brotman in 1983 and is headquartered in Issaquah, WA. (COST, n.d.). In this essay, the 2014 annual report of Costco will be reviewed using the financial analysis tools of liquidity, profitability and solvency. A further analysis will consider three (3) non-financial factors that impact on investment decisions. Financial Tools Analyzing Liquidity Liquidity is defined as the degree to which an asset or security can be bought or...
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...Costco and American Express terminate a 16 year old business partnership Costco, a wholesale retail giant and American Express, a financial services corporation, recently announced that they would be ending their contract. According to the terms of their agreement, American Express was the sole credit card accepted at Costco. Additionally, American Express and Costco had issued a co-branded TrueEarnings credit card, which could also be used at other stores. After March 31, 2016, customers will no longer be able to use American Express credit cards in Costco. The TrueEarnings credit card will also be discontinued [1]. From a marketing perspective, this could have several consequences for both firms. What are the implications for each company's brand with this decision? American Express’s brand image has been adversely affected with the termination of its contract with Costco. There are several factors that contribute to the same. • Low confidence of Costco in American Express’s brand: The termination of the contract, albeit from a financial perspective, implies that the exclusivity that American Express had commanded has ceased to exist. Costco clearly sees no benefit in being associated with American Express’s brand, which may result in declining confidence among American Express customers, particularly those associated with the TrueEarnings card. • Declining status symbol: An erstwhile force in the credit card industry, American Express currently faces stiff...
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