Retailer Profiles : Costco
Profile Pages such as this one on the site will be dedicated to providing specific information on individual companies that are leaders in the food retailing industry.( As a reminder, this is a personal website with no direct affiliation to any company )
Costco :
◊ Costco operates over 400 wholesale " big box " stores in the U.S., Canada, Japan, Taiwan, South Korea and the United Kingdom. In Mexico they are 50% partners with Controladora Comercial Mexicana operating 23 of the 400+ membership based stores.
◊ The success of their operations primarily revolves around their cost efficient distribution methods by buying direct from manufacturers and shipping direct to stores where many other retailers deal with brokers and distributors. This also places some limitation on the number of possible stores where they in many places lack a full distribution network. ( ie. In Canada, although they have 62 stores in 9 provinces most are centralized in Quebec and Ontario with 36 stores and 19 of their stores are in Alberta and British Columbia with limited presence through the rest of the country )
◊ Another reason for their successes and ability to control costs is that on average they carry only 3,700 to 4,500 SKU's whereas most supermarkets and other retailers on average carry between 40,000 and 60,000 SKU's.
◊ Total sales revenue for 2003-2004 ( their fiscal year runs August to August ) was $63.2 billion Canadian. Continuing growth of their Kirkland Signature lines of Private Label product will help to increase sales growth and profitibility.
◊ Food Retail accounts for 30% of sales and recent developments in operations has them opening and expanding on Cosmetics and Self Serve Check Outs in the U.S.
Links to their operations around the world are :
Costco - U.S. Costco - Mexico Costco - U.K. Costco - Japan Costco - Korea
Did You Know ?
◊ According to their Annual Report, their average annual sales per warehouse store is $ 105 million U.S. or $ 140 million Canadian. ( In the U.S., the average annual sales per warehouse is $ 112 million U.S. )
◊ Up until October of 2003, a division of France's Carrefour owned 20% equity interest in their U.K. operations. They are now a 100% wholly owned subsidiary.
◊ Beyond their executive team responsible for operations, most on their board of directors are in their late 60's to late 70's with their President and CEO James Sinegal being at the midpoint at age 67 and that at his request he did not receive a bonus as per their company incentive programs for the past 3 years nor has his $ 350,000 U.S. salary increased also at his request. However, values of his stocks and options are in the double digit millions.
◊ As they continue to expand globally their next venture will take them into the Australasia markets of New Zealand and Australia. If you are in the industry and want an in-depth look at Costco's operations and their prospects in this new market, Coriolis Research from New Zealand offers a detailed report on Costco at the link below.
I've been fortunate to be able to review a copy of the report and it can all be summed up in one word ; " Impressive "
As a whole the report is detailed yet clear and concise on information. The " Understanding Costco " portion of the report thoroughly explains the evolution of Big Box stores from the very beginning to present day and provides the information to show why they are the best at what they do. Clearly from the report you can see why Wal-Mart and others follow their lead with Sam's Club and other operations.
Further, the " Costco in Australasia " portion sets out the projected development and impact of Costco in that region in a clear and well thought out manner. Most intersting is a comparison of how Costco evolved in Canada that could serve as a template for Australasian growth given the comparable markets of both regions.
In one single report Coriolis Research has taught me more about Costco and their operations than I have been able to find out elsewhere over the years and as with all of their research reports, I highly recommend it....you'll be amazed and surprised...I was !
( Special thanks go to Timothy Morris from Coriolis Research )
Click on the pic below to take you to the Coriolis Research Costco Report Page :
