SWOT Analysis Strength: Steady increase of sales and earnings in the past 10 years with an outstanding reputation among its customers. Most of the financial ratios match the industry level. Some are even better than the industry standards.
Weakness: Costco has a relatively low net profit margin compared to its competitors. Costco’s margin was 2.12% in 2017 …show more content…
I used the regression analysis to calculate the sales. Since Costco’s sales has been having a linear growth in the past ten years, it was not that difficult to come up with the formula to project the future sales. The projected sales in 2018 has a bigger increase of 7.8% rate. However, 2019 and 2020, the sales are projected to grow only 5.3% and 4.7%. Based on this calculation, we estimate the growth rate of the future three years is 5%. Reports show that Costco has a very high retention rate for membership and it is aggressively promoting the membership to more customers. So we can predict that the membership fee income will increase 2.28% as it happened in the past few years. For the sales to grow, the cost of goods should grow accordingly because without increasing the inventory, Costco would not be able to increase its sales. The projected net income will increase a decent 5 to 6% as usual in 2018, 2019 and