Full Description

Costco Wholesale Corporation (Costco) operates membership warehouses that offer its members low prices on a limited selection of branded and selected private-label products in a range of merchandise categories. It buys the majority of its merchandise directly from manufacturers and route it to a cross-docking consolidation point (depot) or directly to its warehouses. The Company’s depots receive container-based shipments from manufacturers and reallocate these goods for shipment to its individual warehouses. The Company’s warehouse format averages approximately 143,000 square feet. Its warehouses operate on a seven-day, 69-hour week. It carries an average of approximately 3,800 active stock keeping units (SKUs) per warehouse in its core warehouse business. Many consumable products are offered for sale in case, carton or multiple-pack quantities only.

Costco Mexico, the Company’s 50%-owned joint venture, operated 32 warehouses, as of August 30, 2009. The Company has two primary types of members: Business and Gold Star (individual). Businesses, including individuals with a business license, retail sales license or other evidence of business existence, become Business members. Individual memberships (Gold Star memberships) are available to individuals, who do not qualify for a Business membership, which includes a spouse card.

During the fiscal year ended August 31, 2009 (fiscal 2009), sundries (including candy, snack foods, tobacco, alcoholic and non-alcoholic beverages and cleaning and institutional supplies) accounted for 23% of Costco’s net sales; hardlines (including appliances, electronics, health and beauty aids, hardware, office supplies, garden and patio, sporting goods, furniture and automotive supplies) accounted for 19%; food (including dry and institutionally packaged foods) accounted for 21%; softlines (including apparel, domestics, jewelry, housewares, media, home furnishings, cameras and small appliances) accounted for 10%; fresh food (including meat, bakery, deli and produce) accounted for 12%, and ancillary and other (including gas stations, pharmacy, food court, optical, one-hour photo, hearing aid and travel) accounted for 15%.

The Company competes with Sam’s Club, BJ’s Wholesale Club, Amazon, Wal-Mart, Target, Kohl’s, Lowe’s, Home Depot, Office Depot, PetSmart, Staples, Trader Joe’s, Whole Foods, Best Buy and Barnes & Noble.