Costco Executive Summary

Costco is into Services Sector. It is part of Industry which deals with Discount &Variety Stores. Costco operates membership warehouses where it offers various types of merchandise like household consumables, Electronics, Automobile, garden etc. to its members. Costco is well diversified and also operates Pharmacies, Gas stations, Travel business etc. Thus it fulfills almost every need of its members. It boasts of 600+ warehouses across 8 countries with earnings in excess of $2 Billion on Sales of $100 Billion. It has 184,000 employees worldwide and more than 1000 suppliers who have to follow a rigid & comprehensive supply chain & quality policy.

Due to its diverse products range and low prices to its members, it has very high sale volumes and

Costco has strong financials. A review of its annual reports shows that Costco believes in rewarding its shareholders by having a Liberal dividend policy. Its Dividend had been $1.03 in 2012 and jumped to $8.17 in 2013 due to Special dividend of $7.00.

Costco Debt to Equity Ratio was averaging at about 1.20 till 2012 but then it increased to 1.80. But its healthy TIE ratio of 31.82 and Current Ratio of 1.19 will help it in servicing new Long Term Debt and is not a cause of concern.Costco’s Quick ratio is on lower side at 0.60 but its Collection period is steady at 62 days. In 2012, Costco’s Sales revenues cross $100 Billion for the first time. However its Asset utilization ratio dropped indicating that increase has sales was on a higher asset base. This is something management should be concerned about.

Costco’s Profitability ratios indicate that that Its Gross profit margin is stable at 12.6%. Net profit margin has improved from 1.7% to 1.9%. Return on Assets (ROA) has improved from 6.3% to 6.7%. Return on Equity (ROE) also has shown healthy increase YoY& is currently