Costco (NASDAQ: COST) is a popular, multibillion-dollar membership warehouse club. For an annual fee, members get the opportunity to walk around, trying free samples of food as they purchase anything from a brand new car to a gallon of olive oil. Costco’s goal is to bring its customer the best prices on quality, brand name merchandise by being extremely selective about the quality, price, brand, and features of their products.
The global retailer has 727 locations to date and has been on the forefront of wholesale shopping since it opened in 1976. Costco became a big player in the retail industry in 1983 when it expanded from serving only small business customers to the general public.
While many other retailers, such as J.C. Penney (JCP) and Sears (SHLD), have been setting multi-year lows, Costco has proven to be almost unaffected by the surefire “death of retail” as it continues to solidly rise over a five-year period. This is mainly because Costco is no ordinary retailer. In fact, most of Costco’s revenue is from subscription sales, not the sales from the goods themselves, and therefore, is not as subject to the competitive selling market.
Costco has a stronger stock than most because it has differentiated itself from other retailers by becoming the wholesale warehouse monarch. The warehouse club setup creates Costco’s unique, steady growth pattern that makes Costco a fairly dependable investment. The company’s net income currently floats around 2% of sales and has doubled over the past decade, allowing them to give most of its excess cash to investors.
Due to their annual operating cash flow of approximately $4 billion, Costco has the opportunity to, unlike many other retailers, allot plenty of resources to their store expansion strategy in addition to funding the important priority of e-commerce. This is an important addition, as e-commerce seems to be becoming the new way to shop for anything from groceries to home good items. A strong online presence will help set the company even further above other big box retailers.
In this article, I will discuss Costco’s financials, how it compares to its competition, and its possible pitfalls in this volatile market. Despite the volatile nature of the industry, Costco is a powerhouse in the retail sector as it continues to impress both its shareholders and the general public while proving to be a viable stock for investors.
Last month alone, Costco’s sales climbed 6.3%,…