Costco Whole Sale Corp. Case Study

1. Introduce the company. Talk about the industry it is in and other information that may be relevant to the financial analysis.

The corporate profile is, Name: Costco whole sale Corp. Exchange: National Association of Securities Dealers Automated Quotations (NASDAQ, 2016). Number of shares of common stock outstanding: 439,777,272. Country: united States. (NASDAQ, 2016)

Costco is a membership warehouse that allows people to buy items in bulk at a lower cost. There is a yearly membership fee and it is separated into two different levels of membership, the first is the Business membership at a cost of $55.00 per year. The second membership is the Executive membership and it cost $110.00 per year. The executive membership gives the members a 2% reward, or cash back at the end of the year for all purchases. The reward comes in the form of a check and you can use it however you like, cash it, spend it at Costco or towards a new membership, it is delivered in form of a check at the end of your membership year. In 1976 Sol and Robert Price raised $2.5 million dollars from their friends and family to open Price club, which was their first warehouse club that was designated for business owners only. Located in San Diego California the doors open July 12th.  In the first year of operation the company lost $750,000, but by 1979 Price club had two locations, 200,000 members had signed up, 900 employees and had made one million dollars in profit. In 1983 the First Costco opened their doors in Seattle Washington and within two years two more locations in Spokane Washington and Portland Oregon had opened. The next Costco opened in Utah in 1984 and sales grew over a billion dollars. In 1985 with nine store open in five states, the price of a hot dog and soda was $1.50 and Costco offer public stock options. 1986 Forbes magazine names Costco the “Best managed company”, there are 3.2 million members. 22 locations, Portland is the first location to open a pharmacy. 1987 Costco opens a bakery Department within their stores as well as optical labs. By 2000 the company had opened warehouses in England, Seoul, Taiwan, japan and Midwest states. The 2% rewards program was initiated for executive members and the stocks splits 2 for 1. 2003 Costoco.com opened and generate $226 million and average individual warehouse sales was over $105 million. In 2005 American express partnered with Costco and Forbes listed Costco at 29 out of the Fortune 500. A of 2016 there are 691 locations worldwide and a hot dog and soda is still $1.50. The average employee earns $20.89 an hour, compared with the average US citizen earns $12.67 an hour.  (Stone, 2015) Employees are also given one week vacation after their probations period ends and earn a week of vacation every 5 years. They have stock options, free membership to the store and 401(k)’s which Costco augments with matching funds. 88% of all employee have full health benefits, the employees only pay less than 10% of the cost of the plan. Employees also enjoy job security, during the 2009 recession, instead of laying off employees, Costco handed out raises. The second largest retailer behind Walmart, in an industry know for stinginess, Costco has thrived. Many retailers besides Amazon have struggled to keep online shoppers and their investors happy, Costco has appeared to not only have weathered the recession but sales grew 39% over the last five years and stock prices have doubled since 2009. Even when the old CEO Jim Singeal retired in 2009 and replaced with “plain spoken” Craig Jelinek, the share prices rose 30% that year. He stated “We Know it’s a lot more profitable in the long term to minimize employee turnover and maximize employee productivity, commitment and loyalty.”  (Stone, 2015) Jelnik beliefs in how Costco treats their employee has crossed over into the public, He wrote a letter to congress in February of 2009, urging them to increases the federal minimum wage.

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