01—Abstract
Summary
Summary of the 10-K filed October 16, 2009. Cited figures are marked; the original filing is the authoritative source.
Costco Wholesale Corporation's 2009 10-K filing reveals a challenging year marked by a 1.5% decrease in net sales to $69.9 billiona, largely due to a 4% drop in comparable warehouse sales.
This decline was exacerbated by significant gasoline price deflation and unfavorable foreign currency movements, which collectively impacted sales by approximately $4.6 billionb. Despite the sales dip, the company maintained a strong membership base with a renewal rate of 87% and saw an increase in Executive Membership penetration. Key financial metrics indicate a 15% decrease in net income to $1.09 billion, or $2.47 per diluted share.
This was influenced by a mix of factors including increased SG&A expenses as a percentage of sales due to lower sales volume and higher healthcare costs, partially offset by an improvement in gross margin as a percentage of net sales. The company continued its commitment to shareholder returns by increasing its quarterly cash dividend and actively repurchasing shares. Costco's robust balance sheet, ample liquidity, and strategic approach to managing operational costs and capital expenditures position it to navigate the prevailing economic conditions.
02—Key points
Key Highlights
- Net sales for fiscal year 2009 decreased by 1.5% to $69.9 billion, primarily due to a 4% decline in comparable warehouse sales, impacted by economic conditions, gasoline price deflation, and foreign currency exchange rates.
- Net income decreased by 15% to $1.09 billion, or $2.47 per diluted share, compared to the prior year.
- Membership fees increased by 1.8% to $1.53 billion, supported by new warehouse openings and increased Executive Membership penetration, though negatively impacted by a litigation settlement charge and currency fluctuations.
- Gross margin as a percentage of net sales improved by 28 basis points, benefiting from lower gasoline sales penetration and a favorable LIFO reserve adjustment.
- Selling, general, and administrative (SG&A) expenses increased as a percentage of net sales by 58 basis points, driven by lower sales volumes and higher employee healthcare costs.
- The company opened 15 new warehouses (net of relocations and closures), expanding its footprint to 527 locations globally.
- Costco repurchased approximately $57 million worth of its common stock during the fiscal year and increased its quarterly cash dividend from $0.16 to $0.18 per share.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, Costco Wholesale Corp kept $0.02.
- Revenue$71.42B100.0%
- Cost of revenue−$62.34B87.3%
- Gross profit$9.09B12.7%
- Operating costs−$7.31B10.2%
- Operating income$1.78B2.5%
- Interest, other & tax−$691.0M1.0%
- Net income$1.09B1.5%
Where FY2009 revenue went
$71.42B- Cost of revenue: $62.34B, 87% of revenue
- Net income: $1.09B, 1.5% of revenue
- SG&A: $7.25B, 10% of revenue
- Interest, other & tax: $691.0M, 1.0% of revenue
Kept 1.5% as net incomeNet income $1.09B · 1.5%Interest, other & tax $691.0M · 1.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed October 16, 2009Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $71.42B$72.48B | −1.5% |
| Cost of Revenue | $62.34B$63.50B | −1.8% |
| Gross Profit | $9.09B$8.98B | +1.2% |
| SG&A Expenses | $7.25B$6.95B | +4.3% |
| Operating Income | $1.78B$1.97B | −9.8% |
| Interest Expense | $108.00M$103.00M | +4.9% |
| Net Income | $1.09B$1.28B | −15.4% |
| EPS (Basic) | $2.50— | — |
| EPS (Diluted) | $2.47— | — |
| Shares Outstanding (Basic) | 433.99M434.44M | −0.1% |
| Shares Outstanding (Diluted) | 440.45M444.24M | −0.9% |
05—Questions
Frequently Asked Questions
What was Costco's comparable sales performance in fiscal year 2009, and what were the key drivers of this performance?
Costco reported a 4% decrease in comparable warehouse sales for fiscal year 2009. This decline was primarily attributed to challenging general economic conditions impacting consumer spending, a significant decrease in gasoline prices (deflation), and unfavorable foreign currency exchange rates. While the average amount spent per member decreased, shopping frequency saw an increase.
How did the company's membership fee revenue perform, and what factors influenced it?
Membership fees increased by 1.8% to $1.53 billion in fiscal year 2009. This growth was driven by new memberships from warehouse openings, continued benefits from recently opened warehouses, and a higher percentage of members opting for the Executive Membership program. However, the increase was partially offset by a $27 million charge related to a proposed litigation settlement concerning membership renewal policies and the negative impact of foreign currency depreciation against the U.S. dollar.
What is Costco's strategy for growth and capital allocation in the current economic climate?
Costco's growth strategy continues to involve opening new warehouses, with plans to open approximately 16 to 18 new locations in fiscal year 2010, supported by capital expenditures of approximately $1.3 billion. The company also remains committed to returning capital to shareholders through dividends, which were increased in 2009, and share repurchases. The company's business model, focused on low prices and membership value, is seen as resilient in the prevailing economic environment.
What were the main factors impacting Costco's profitability in fiscal year 2009?
Costco's net income decreased by 15% in fiscal year 2009. Key factors impacting profitability included a decline in net sales, higher selling, general, and administrative (SG&A) expenses as a percentage of sales due to lower sales volumes and increased healthcare costs, and the negative impact of foreign currency fluctuations. These were partially offset by an improvement in gross margin as a percentage of sales, driven by a lower proportion of gasoline sales and a favorable LIFO reserve adjustment.
06—Continue