Costco Financial Ratios

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Costco Wholesale Corporation is a membership warehouse club with 671 warehouses in nine countries on four continents. The company opened in 1976 under the Price Club name in San Diego, California. The first Costco warehouse opened in 1983 in Seattle, Washington. In 1993, Costco and Price Club merged under the name PriceCostco. In January 1997, after the spin-off of most of its non-warehouse assets to Price Enterprises, Inc., the Company changed its name to Costco Companies, Inc. On August 30, 1999, the Company reincorporated from Delaware to
Washington and changed its name to Costco Wholesale Corporation. I am long-time member of Costco and appreciate their competitive pricing on a wide range of merchandise. Costco is also well known …show more content…

The data enables easier visualization of the proportions of separate accounts. Vertical analysis results in common-size financial statements that enable easy comparisons of financial data among companies and the industry sector. Overall, Costco’s vertical analysis is rather uneventful. No percentage moved further than 0.1% when comparing the years of 2013 & 2014. While uneventful, there are still a few areas I would like to analyze.
Merchandise Costs or Cost of Goods Sold (COGS)
The most significant percentage that stands out in the vertical analysis is the Merchandise Costs. The Merchandise Costs for Costco equals 89.3% of Net Sales. This number seemed high to me, so I searched through Costco competitors to check their merchandise costs percentage. Walmart is 75% and Target is 71%. From a consumer standpoint Costco is the place to shop since their markup is only 10.7%; less than half of their major competitors. This also shows Costco needs to sale over twice as much inventory as their competitors to earn the same amount of profit.
Interest …show more content…

Preopening expenses are related to new warehouses, new regional offices and other startup operations. In 2014 Costco opened or relocated 30 warehouses. This information correlates directly with the increase in Plants & Property which will be shown in the horizontal analysis.
Membership Fees
Also of note, without membership fees Costco would be in the red. Membership fees contribute 2.2% to Costco’s total revenue and without membership fees, Costco’s Net Income would be -0.3%. As a prior member (when I was in the states), I used to complain about the membership fee. Now, I see that it plays a vital role in Costco’s annual earnings.

Horizontal Analysis (Refer to Table 2)
Horizontal analysis, also known as trend analysis, shows the changes of the financial data over a period of time. The data is used to determine increases or decrease that have taken place. The data is expressed in dollar and percentage

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