Costco Company

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Costco Company is a wholesale corporation that runs an international chain of membership warehouses, designed to help the small and medium sized businesses to reduce costs in purchasing for resale. Apart from reducing costs, these warehouses present one of the largest exclusive product category selections under one roof. Costco is known for profit making, and has grown from a zero to nearly over a three billion-dollar seller in less than six years span. The secret behind its success is its strategy of selling products at low prices but at high volumes. This paper analyses Costco annual reports for the year ended August 31, 2010 and gives reasons why an investor should make this firm his choice.

Summary of the CEO letter to shareholders

In this letter, the top officials are very optimistic about the year 2010, having been disappointed by the past two years. Though the year 2010 was characterized by fragile economic conditions in most of their markets, the year produced a record in terms of sales and earnings. This record sale is seen by Costco’s achievement of $7.63 billion sales in 2010 up from $69.9 billion sales in 2009, a net earning of $1.3 billion, and an eighteen percent increase in earning per share.

Despite the uncertainty in the economy in 2010, members who shopped in the Costco warehouses increased by four percent spending three percent more than they did in 2009. Most of the members shop in their fifty-six stores, which recorded over two hundred million dollars in sales in 2010 with two of them giving more than three hundred million dollars. In terms of expenditures, the letter estimates Costco’s costs to be nearly one billion dollars on capital expenditures. This big capital expenditure is justified in Costc...

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...seeking to achieve high profits at expense of public welfare. This will consequently affect profits and sales negatively.

Audit report

Costco Company financial records were audited by KPMG, who further gave recommendations for improvements in accordance to the auditing requirements. In my opinion they presented a clean report following the required auditing standards and abiding by the standards set by the Public Company Oversight Board.

In conclusion, if I had a chance to invest in any company, I will choose Costco. With this firm I will have the assurance that my shares will yield good returns due to increasing sales and profits they are experiencing, offered by their large customer base both locally and internationally.

Works Cited

Hauch, Valerie. “Costco Loses Bid to Expand Scarborough Gas Bar” The Star 07 Jun. 2011. 4-5. Print.
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