Case Study: Costco Wholesale Corporation

From a financial perspective, Costco’s income statement shows it has increased its total revenue from its domestic and foreign stores every year. Operating income, total and net assets, and number of warehouses have increased steadily each year. However, long-term debt has sharply increased after 2006 and stockholder’s equity has been inconsistent for the past few years. Newer warehouses are being built to its maximum size and top volume warehouses would exceed $5 million in sales per week.

Q1. What is Costco’s business model? Is the company’s business model appealing? Why or why not?

Costco has many risks associated with its financial and operational performance. One of the biggest risks that Costco is facing todays is the competition from other retailers and wholesalers, such as Wal-Mart and Target. Costco compete with its competitors for customers, qualified employees and management personnel, suitable sites and suppliers. The retail business is extremely competitive and continues to get even more completive. Such events as the evolution of retailing in online channels has improved the ability of customers to compare prices and products and as a result enhanced competition. Any significant increases of competition may adversely affect Costco’s financial performance, and make Costco incapable to compete successfully in the future.

Revenue, warehouses and operating income have steadily increased since Costco went global. The revenue to warehouse ratio has also increased.

Family Dollar’s retail strategy will work in both good and bad economic times. The company’s mission: is to provide our customers with a compelling place to shop, our team members with a compelling place to work, and our investors with a compelling place to invest. Our vision is to be the best, small format convenience and value retailer serving the needs of families in our neighborhoods. (Family Dollar 2012 Annual Report) During the economic downturn, Family Dollar reevaluated the company’s goals. One of the goals the company will be refocusing on will be to build customer

It was not exhibiting a significant decline in quality, but its average performance when compared to the aggressively growing Lowe’s has led its stock price to fall.

Moving onto the income statement portion of the common-size financial statements, an increase in cash and equivalents (3.20% of total assets in 1997 to 5.97% in 2001) and receivables (2.69% of total assets in 1997 to 3.22% in 2001) coupled with a decrease in inventory signify Costco’s improving efficiency over this five year period. It is important to mention two points. First, the decrease in inventory as a percentage of total assets from 30.8% in 1997 to 27.14% in 2001 signifies an increase in the turnover rate, perhaps due to

In my opinion, Costco is continuing to do well. A few months ago, I read an article online in which Costco employees consider the company one of the best employers to work for in the United States. According to an Indeed report that analyzed its database of 18 million employer reviews, employees at Costco are the most

Costco’s business model is to generate high-volume sales and rapid inventory turnover by offering low prices on a limited set selection of brands and a few selected privately labeled products. This model does not turn a profit on its own with the company operating slightly below its break-even cost. However, to make up for this Costco charges a membership fee and this is a simple way of padding their profit but also enabling them to provide a customer experience that emphasizes value.

During this time, sales increased from: $7.11 billion in 2010 to $7.99 billion in 2012. Earnings improved from $2.84 to $3.57. While the total amount of dividends rose from $1.00 to $1.72. These figures are showing how the company has been continually increasing sales, earnings and dividends over the last three years. In the future, the management predicts that their current strategy will increase returns. As, executives believe that their focus on building the brand and accounting for costs will lead to net earnings of $5.20 to $7.19 annually by

At the end of 2012, Costco was a successful business, but there are some issues that they would need to deal with. These issues mainly arise from their previous successful ventures as a warehouse wholesale company. The first issue is that Costco has competitors that can actually be and are a threat to their success. Competition allows a company to improve itself and prove its prowess to its customers. However, when a competitor is able to provide the service at a much reduced cost, problems will arise. As for the second issue, it seems that Costco’s efforts to become an international company are moving slowly. They have not reached a point where their US and Canadian warehouses provide a backbone for their finances. Costco’s third issue is that their finances are too reliant on acquiring new members and not on selling their products. If they cannot keep acquiring new members at a steady rate, their financial infrastructure could suffer.

The Dollar General is an American wholesale company that was first initiated in Scottsville, Tennessee by Turner and Cal Turner. Its headquarters are located in Goodlettsville, Tennessee. The mission statement of the Dollar General is "Serving Others." This mission statement helps to bring out the innate requests and intentions of the company in the United States of America and other countries in the world. The company has a vision that describes how it manages to cater for four different types of people. These four groups of people include the customers, the community, employees, and shareholders. Within these categories of people, Dollar General aspires to serve others through deliver of price quality and terrific prices for customers, opportunity, and respect for employees, a superior return for shareholders and a better life for the communities.

Many of Costco’s strengths are held with their low prices, limited selection, and their employees. Costco prefers to hire from within and focused on career longevity and development for their employees. It was company policy to fill at least 86 percent of its higher-level openings buy promotions from within; in actuality, the percentage ran close to 98 percent, which meant that the majority of Costco’s management team members were home grown (Gamble & Thompson Jr., 2009, p. 226). Even with their many strengths, Costco still had some weaknesses. Their warehouses appeared to be very industrial, with concrete floors and merchandise displayed on wooden pallets. Costco also relied heavily on word-of-mouth advertisement, which saved the

Ahead of salesforce.com’s (NYSE: CRM ) earnings report, I highlighted three items that investors interested in the company’s story should look for when the earnings results came in. The first was a potential upward revision in the company’s full-year guidance, as sell-side estimates were largely ahead of the company’s own guidance. The next two were operating margin and free cash flow growth trends.

on expense control. Finally, company executives reiterated their long-term revenue-growth targets of 8% to 10% and earnings-growth targets of above 15%.