Case Study Of Costco Wholesale Corporation

Improved Essays
Costco Wholesale Corporation (NASDAQ:COST) has outdone its success with business subscribers. It

heavily promotes its executive membership and aims more expansion in its subscriber’s base. It has a

great renewal rate. Another area where Costco excels its rivals is private label merchandise. The Kirkland

Signature brand has been a great success and increasing profitability of the company. Costco is investing

in e-commerce as Walmart has a competitive advantage over there. Management does understand that

it has to compete efficiently as its distinctive value is tied to that fact that member essentially going to

the warehouse. E-commerce will be an important focus for the company as it booked $3.5 billion in

online sales last year.
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Costco management has done great job building into a $60 million market cap business focusing on

North America and in particular the United States. Although concerns were raised that Costco

warehouse model would not fit international markets. Huge future growth can be expected if

management figures out as to how to succeed in these foreign markets. Also if it performs as it did in

North America, chances are that there will be immense growth in the coming future.

The company makes most of its profits from membership fees. It uses smart supply chain strategies and

is quite effective in cost savings in areas like marketing and advertising. Also it pays good salaries to its

employees along with additional benefits which in turns results in effective workforce. There is less

employee turnover. The workforce is efficient and motivated which results in better results and good

business performance. The company believes in customer satisfaction as well which is why company has

ranked in the top position among its industry in the American Customer Satisfaction Index each year for

more than a decade.

Costco opened 13 new stores during the quarter totaling to 686 warehouses. Out of which
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With its low price strategy, it is aiming to win over bargain seeking motorists looking for

the cheapest fuel. Costco is dedicated to expand its fuel offer further in Australia.

After we looked into Costco financials, we can analyze the company’s performance. Costco revenue has

increased by $3,559 million from the fiscal year 2014. Gross profit has increased from $ 14,182 million to

$ 15,134 million which is a 7% increase during the fiscal year 2015. Profit before tax and after tax has

risen by 13% and 16% respectively. Earnings per share on 30th August 2014 were 4.65 whereas as at 30th

August 2015, it is 5.37 which mean that there’s an increase of 15%. There has been an appreciation in

share price of 15%. Gross margin have remained the same where was return on equity before tax and

interest was 27% which has now increased to 35%. Return on equity after tax and interest have

increased by 5% over the year which tells that the company is generating good profit with the

shareholder’s money. Current yield is 1.04%. At this very moment Costco share price is $154.07 and has

a 52 week return of

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