Generally Accepted Accounting Principles and Costco

2946 Words Sep 16th, 2005 12 Pages
Financial Statement Analysis:
Costco Wholesale (COST)

Executive Summary Costco Wholesale is recognized as the largest wholesale club operator in the US. Over the three-year time period of 2002-2004, this company has expanded its membership base while increasing its number of warehouses both in the U.S. and internationally. In 2004 alone, net sales increased 13.1% over the prior year, driven by an increase in comparable sales of 10% and the opening of twenty new warehouses; net income increased for fiscal 2004 by 22.4%, or $1.85 per diluted share; and for the first time, the Board of Directors declared a quarterly cash dividend, with the company issuing quarterly dividends in the third and fourth quarters of $0.10 per share.
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For example, one of the focuses this year was on adding staff at the front-end registers which makes for a more enjoyable shopping experience by its members.
The company has done extensive research into placement of its new locations. Research and history showed that its strong markets can successfully support many additional Costco warehouses and as a result, most new stores were added to existing markets.
In fiscal year 2005, Costco plans to open between 22-25 new warehouses worldwide, and hopes to double the number of warehouses within the next 10 years. In addition to the physical locations,, its "virtual warehouse" is projected to become a $5 billion business, and if sales continue to grow anywhere near the 66% growth in 2004, this goal is entirely possible. In 2004 it also rolled out the E-commerce order stations in the warehouses to enhance the top-notch, special-order kiosk offerings.
Costco also plans to continue to be one of the leading dealers of fine diamonds nationwide. Its expansion of the Kirkland Signature private label, a label that has a reputation for quality and value among Costco members, is projected to continue, with the newest addition being the development of a Shiraz wine.
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