...The purpose of this report is to conduct a comprehensive business performance analysis using financial historical information/analysis of Costco. While Costco may not seem to have the revenue, assets and market share like similar and larger companies such as Wal-Mart and Target they are without a doubt a very profitable and successful company. What Costco lacks in high margins, they make up for in being a highly efficient company boasting high asset and equity turnover while maintaining optimum liabilities and debt to equity ratios. Costco is a great company that is seeing profitable success due to their business model that prioritizes quality for both its customers and employees. However, emerging with the 21st century are new ways of doing business. Online companies like Amazon.com are quickly taking market share not just from Costco but also their biggest competitors: Wal-Mart and Target. In order to stay relevant, Costco will need to maintain their business growth in the coming years and also find ways to compete against online retail giants like Amazon.com. 1. Company Background Costco is a multi-billion dollar warehouse company that operates on a global scale. Consumers can frequent Costco to find merchandise including but not limited to groceries, electronics, furniture and home goods, pharmaceuticals and gasoline. Costco specializes in purchasing its merchandise wholesale and re-selling to consumers. Consumers who frequent the warehouse club are required to pay...
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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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...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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...------------------------------------------------- To: Margarita Torres, Investor in Costco ------------------------------------------------- From: MSF Analyst ------------------------------------------------- Date: 6th November 2013 ------------------------------------------------- Subject: Evaluation of Costco Operational Forecasting Purpose: The purpose of this memo is to provide an analysis and valuation of Costco’s forecasted operational performance over the next 10 years. Appropriation of the Five Factors: Given that the market is highly competitive, the forecast undertaken for the number of warehouses was a conservative approach along with a 5% increase in the no. of US stores. Refer to Appendix 1. Sales per store are considered a significant factor in determining profitability and shareholders’ equity. According to the forecast stated by Margarita Torres, the management expectations might be overestimated ($118m in the forecast, $125m-$150m). The membership per store is a relevant factor in determining the future performance of Costco, given that Costco’s goal is achieving low gross margins. The membership base will contribute directly to the net income and promotes a sustainable income for each store. The pre-tax margin defined by the management is achievable; hence the forecasts in the common size analysis state that the pre-tax margin will be range from 3.12% to 3.53% in 2002 and 2006 respectively. The international expansion should...
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...of Costco and Riordan Manufacturing. An analysis will be performed to expose which competitive advantages Riordan has in common with Costco. An estimate on which competitive strategies Riordan would use to improve innovation and sustainability of business operations domestically and internationally will be given. An explanation will also be presented to describe how the competitive strategies chosen may affect the sustainability of long-term performance and how the global market would affect the business strategy of Riordan. * Like Costco, Riordan manufacturing generates greater sales and margin to optimize their investment. Riordan’s sales and product strategy has been proven effective through their pricing and product selection, which sustains their strategic goals and objectives. To retain their customers, they increase their sales through employee satisfaction. The exceptional customer service is implemented in order to satisfy their financial performance as part of their objective. This puts Riordan in the lead to achieve their goals and secure some of the largest accounts to increase their market. The value and the effectiveness of Riordan manufacturing is truly as effective using the SWOT analysis. They also exemplify ways to generate planned revenues with the delivery of their product, which in turn strengthens their competitive advantage. The structure of their plan is based on financial goals, action plans and objectives with reviews of their performance. Riordan...
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...Costco Case Analysis Assignment # 1 Mark Frenkel MGMT 670 9046 02/21/11 Jim Sinegal initially took a job at Fed -Mart as a means to pay his bills while attending San Diego Community College never imaging that this decision would forever change the direction of his life. It was there that he met Sol Price, who ran the company and who mentored his further inclusion in the business. Sol had a vision that he acted on when he founded his Price Club with the goal of establishing a member warehouse retailing niche business. Having embarked on this path, he took Jim with him and they shared a vision for shaping how they would do business going forward. Initially, Price was content in becoming a leader in member warehouse retailing until he correctly recognized an opportunity to gain more sales volume and greater negotiating leverage with suppliers by granting membership to individuals which arguably created the market for deep-discount warehouse clubs. Sinegal excelled at understanding the driving elements in this type of marketing and became particularly adept at understanding what was working and what wasn’t at stores, which was something that Price was also very good at. Noticing these burgeoning skills, Price made him the manager of the original store. It was here that Sinegal learned the craft at the hands of his mentor, a task he did so with such skill that he decided to leave the proverbial nest and team up with Seattle-based...
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...CPIM Certified Advanced Facilitator Assuming the role of a Mutual Fund Manager, Costco Wholesale, a Fortune 500 company, has been chosen for analysis to decide whether to invest funds with the organization. This paper will high-light the results of a SWOT analysis, the internal and external stakeholders, their wants and needs, and finally, how their wants and needs are being met by the company. Costco Wholesale Company is an acknowledged market leader and was listed 28th in the top 100, most successful businesses in the world, in 2010, and 25th in 2011. “In 1975, a Mr. Solomon Price, sold his company Fed-Mart to begin a new retail venture, aimed at small businesses called the Price Club. Mr. Price invited Jim Sinegal, owner of Costco, to help him open the first Price Club Warehouse in 1976. Sinegal learned from Price the business of a high-volume warehouse with only a limited number of products, and left Price in 1983 to start Costco, with partner Jeff Brotman. Costco merged with Price some years later, and Sinegal bought Price out and remained as CEO of Costco. Today, as of August 31st, 2012, Costco has 608 warehouses, 66.5 million cardholders, 160,292 full and part-time employees world-wide, and a revenue of $88.9 billion annually” (Corona, 2012, p. 558). One cost advantage for Costco is that they sells in bulk; allowing customers to purchase goods at a cheaper price, no big fancy shelving or customized...
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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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...Jennifer Wepking-Doeden BADM 482 Case 1 – Costco 7/14/14 Costco Case Analysis INTRODUCTION Costco’s mission statement reads: “The company will continue to pursue its mission of bringing the highest quality goods and services to market at the lowest possible prices while providing excellent customer service and adhering to a strict code of ethics that includes taking care of our employees and members, respecting our suppliers, rewarding our shareholders, and seeking to be responsible corporate citizens and environmental stewards in our operations around the world.” (CITE) After evaluating Costco’s this mission, I believe their business model and strategy is extremely appealing to all parties involved. To a customer having the highest quality goods that come with low price tags, while providing excellent customer service is what they look for in this competitive market. If a customer purchased a poor quality good or experienced horrible customer service while at Costco, they most likely won’t return. Another appealing aspect Costco gives to customer is that the CEO will answer phone calls about the complaints. This will make the customer feel like something will be done about their complaint. Employees should admire the involvement the CEO Jim Sinegal presents and how the company’s business model appeals to them. The strict code of ethics they company projects is a major appealing aspect. Projecting correct ethics will help the company again worthy employees...
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...Business Analysis Part II R. Butler MGT/521 October 22, 2012 Melany Felton Business Analysis Part II The company chosen to research was Costco Wholesale, looking at the financial health of Costco Wholesale I had to determine their cash flow and how they fair with other similar organizations in the industry. When reviewing Costco Wholesale’s income statement/balanced sheets they showed a total net income of 609,000 from continuing operations and liabilities for the quarter, according to assets quarterly data for the period ending 8/2012. The cash equivalents, marketable securities, accounts receivables, other inventories and, current deferred income taxes accounting for other earnings. Costco had total current assets of 13,526,000 for this quarter. The income balance sheet for the period was 609,000 with the total revenues year to date of 1,709,000 (www.costcowholsale.html.com). A review of Wal-Mart/Sam’s club, Costco’s number one competitor, showed a quarterly balance for operating income after depreciation for the same period was 6,698,000 and income total revenue of 114,296,000 for the quarter (Wal-Mart, NYSE.WMT). A review of Target’s finance and total revenue is compared to Costco and Sams Club/Wal-Mart; however, Target does not operate the same type of warehouse store as its other competitors, but they do operate something similar in Target Super Stores. Target has over stores 1700 stores in 49 states and more than 240 Super Target stores. Balance sheets and...
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...Factors on Marketing Decisions of Costco Wholesale Corporation Environmental factors consist of all the factors and activities which have a considerable impact on the running of the business. Environmental factors have a powerful impact on the normal functioning of the any business, especially in the marketing decisions (Pagell & Halperin, 2000). These factors pose challenges and threats to the success of any business. In order to deal with such environmental factors a firm should enhance its core competencies and make sound strategies (Staff, 2009). There are various factors which would have deep impact on these new services offered by the firm. The firm should make a strategy after considering these factors. David Jobber describes in his book that with the help of this analysis, the company becomes more competitive and effective to implement the various strategies (Jobber, 2001). Costco Wholesale Corporation is one of the biggest organizations in the retail industry, which operates at the global level. The company was founded by James Sinegal and Jeffrey Brotman (Costco Wholesale Corporation, 2009). On the basis of the sales volume, the company is considered among the world's largest membership warehouses (Costco: About Company, 2009). The company has taken the position of the five largest companies in the United Sates in retail Industry. The Headquarter of the company is situated at Issaquah (Washington) in the United States (Costco Wholesale Corporation Reports...
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...ASSIGNMENT QUESTIONS: Costco Wholesale Corp.: 1. What is Costco’s business model? Is the company’s business model appealing? Why or why not? Costco business model is meant to maximize efficiency by depending on a high sales tied with quick inventory earnings. Costco’s concept is base on offering members the lowest price on a limited selection of national brands, the warehouse format maintain a low cost rate as they buy and sell items in bulk. Costco memberships keep customers loyal, because it accumulate most of its profit from membership fees, they’re able to sale their goods at a very low markup price. Overall Costco’s business model is very appealing, while being positioned to grow its business for the foreseeable future, it has many benefits. Example, efficiency inventory combine with quicker inventory turnover will reduce Costco cots of selling goods. High sales volumes combine with quick inventory allows Costco to sell and receive cash for goods before it has to pay for any of its merchandise, which allows Costco to finance a large percentage of its inventory through the payment terms provided by its vendor rather than having to maintain a sizable working capital to pay for its merchandise. It’s high end target product result in bringing in high-end consumer into its stores which is another reason it’s appealing. 2. What are the chief elements of Costco’s strategy? How good is the strategy...
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...Costco Business Model And Elements Of Costcos Strategy, Management1. What is Costco’s business model? Is the company’s business model appealing? Why or why not?2. What are the chief elements of Costco’s strategy? How good is the strategy?Posted by Alena | Posted Date: 8/7/2011 12:03:45 PM | 1. What is Costco’s business model? Is the company’s business model appealing? Why or why not?Business Model is used to exemplify the methods and ways which we used to generate planned revenue. The Costco’s business model is to generate high sales volume and rapid inventory turnover by offering low prices on limited selection of national branded and select private-label products in wide range of merchandise categories. Costco’s offers these products to their members who are of two types’ business members and gold star members.This business model is tempting because it gives a test to Costco’s management to continue to devise strategies and methods through which they can keep hold of existing members and catch the attention of new members. Otherwise they will suffer failure because there will be a risk that discontented members will not renew their membership. This business model takes company towards total quality management.2. What are the chief elements of Costco’s strategy? How good is the strategy?Strategy is the organization’s pre selected means or approach to gaining its goals or objectives, while keeping in view current and future external conditions. Costco’s strategy’s elements...
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...COSTCO WHOLESALE IN 2012: MISSION, BUSINESS MODEL, AND STRATEGY Jim Senegal was a very effective CEO. He was able to take capitalize on the membership warehouse concept that he learned from Sol Price when he worked for Price club in the late 1970. In 1983, he developed a strategic mission and values “to continually provide our members with quality goods and services at the lowest prices possible”. This resulted in the first Costco being opened in 1983. The crafted strategy objectives centered around “ultra-low prices, limited product selection, a “treasure hunt” shopping experience, low operating costs, and geographic expansion. The rapid inventory turnover, vendor financing, low operating costs, and self service facilities enabled Costco to operate at a significantly lower gross margin and to pass on those savings to members through lower prices and higher quality goods. By charging members a prepaid fee, which supplemented overall profitability, it provided shareholders with an acceptable return. Those strategies could make Costco Wholesale as the third largest retailer in the United States and the seventh largest retailer in the world, also being the clear leader of the discount warehouse and wholesale club segment of the North American retailing industry. Began its operation in 1983 until January 2012, Costco had a total of 598 warehouses in 40 states and Puerto Rico, 9 Canadian provinces, United Kingdom, Korea, Taiwan, Japan, Australia, and Mexico. In 2011 Costco reached...
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