Costco Wholesale Corporation (COST) has become the premier membership warehouse for consumers who prefer no-frills, self-service shopping in a one-stop environment with a wide range of product categories. The Costco name has been synonymous with high quality and savvy product choices for both individual households and businesses throughout the United States, Mexico, the United Kingdom, Australia, Taiwan, Korea and Japan. With over 65 million cardholders and 160,000 employees worldwide, Costco continues to expand into new areas. The stock has rewarded its investors with a steady upward growth since March of 2009.
With both branded and private label goods, Costco keeps a sharp eye on consumer demand with a broad choice of goods in a range of categories that include apparel, toys, books, movies, food, paper products, bakery, pharmacy, one-hour photo, jewelry, small appliances, electronics, automotive, cleaning supplies, office supplies and travel. Costco also adds to their strong customer base with a variety of business services for small and medium-sized companies.
In the conference call held on February 29, 2012. Chief Financial Officer, Richard Galanti, states that quarterly earnings were up $.90 per share from that same period last year, with sales up 10 percent over the previous year. He further reports strongest sales in the Northeast, Southeast and Midwest regions of the United States, with international sales being comparable. Strongest categories in the hardline product offerings were automotive and hardware, with electronics coming in flat for the period. Membership renewal rates are strong despite the recent rise in membership fees. Costco continues to buy back its stock while holding the prices of its good low to attract new membership.
Costco’s competitor Sam’s Club, a division of Walmart (WMT) has suffered with recent negative news stores concerning a variety of misdeeds. Meanwhile, Costco’s public image has surged ahead with fair dealings for its employees and shrewd management that takes its razor-thin margins to give customers the best prices for popular products. Walmart, however, has increased its capital expenditure program, while Costco has cut back, and expanded its overseas market, positioning itself for future growth potential.
In 2011, another Costco competitor, BJ’s Warehouse Club (BJ) announced its acquisition by Leonard Green & Partners and CVC Capital Partners. This change in ownership with its retail expertise will likely be accompanied by aggressive efforts for membership recruitment which could put increased pressure on Costco stock prices.
Costco continues its careful management with lower prices designed to attract new customers and upholds its reputation as an ethical business policies that favor both employees and the community at large. These policies cannot help but serve the company well in the future as the recession continues and corporate governance remains an issue in the general marketplace.