Costco Wholesale is the 5th largest retailer in the U.S. and 8th
largest in the world boasting over $87 billion in sales. They are well
diversified with over 100 warehouses in Canada, Mexico, Japan, South
Korea, Taiwan, England, Australia, and continuing to expand
internationally. Domestically they dominate in numerous markets such
as the northwest & Hawaii where other retailers are steam-rolled.
Private label product lines have been expanded providing for greater
profitability & supply chain innovations have also helped lean this
corporate giant to operate more efficiently. One factor that many miss
is that the majority of Costco locations have gasoline stations that
do huge volumes monthly versus conventional. Costco matches nearby
competitors & the constant replenishment need requires them to have
their net landed cost on gasoline hold close to daily market value. As
gasoline rises & Costco buys at the higher price before the station
down the street does, they must match & run at very low margins.
However, when oil drops (as it has lately) then Costco is the first to
buy the cheaper gasoline & can easily match & make decent margin (net
millions) while the station down the street is still trying to sell
off the remainder purchased at the higher rate.
Costco management understands that retail is in the details and has
competent leadership & an intelligently built business model to ride
through any turbulent storm and continue to triumph as ther majority
of their top sales items are staple goods that people must have
regardless of the economy & smart shoppers flock to where the value is
at by the shopping cart full. I don't know about yours, but my
confidence for this retailer was strengthened when I saw my
neighborhood Costco before the Fourth of July jam-packed in the
parking lot.
Cheers!