01—Abstract
Summary
Summary of the 10-K filed October 14, 2011. Cited figures are marked; the original filing is the authoritative source.
Costco Wholesale Corporation's 2011 10-K filing highlights a strong year of growth and operational performance, driven by a 14.2% increase in net sales to $87.05 billiona.
This growth was primarily fueled by a robust 10%b increase in comparable warehouse sales, alongside contributions from 20 net new warehouse openings. The company demonstrated effective cost management, with selling, general, and administrative expenses decreasing as a percentage of net sales by 31 basis points. Membership fees also saw a healthy 10.4% increase, boosted by higher Executive membership penetration.
Despite a slight decrease in gross margin percentage, primarily due to a LIFO inventory charge and the inclusion of lower-margin gasoline sales, net income attributable to Costco grew by 12.2% to $1.46 billionc, resulting in diluted earnings per share of $3.30. The company also continued its commitment to shareholder returns through share repurchases and a notable increase in its quarterly cash dividend.
Furthermore, the filing marks the initial consolidation of Costco's Mexico joint venture, which had a minor impact on total assets and revenue but no effect on net income per share, reflecting the company's expanding international presence. The leadership transition plan, with the announced retirement of CEO Jim Sinegal and the promotion of Craig Jelinek, was also a significant event disclosed.
02—Key points
Key Highlights
- Net sales increased by 14.2% to $87.05 billion, driven by a 10% increase in comparable warehouse sales and new warehouse openings.
- Membership fees grew by 10.4% to $1.87 billion, attributed to increased Executive membership adoption.
- Selling, general, and administrative (SG&A) expenses decreased by 31 basis points as a percentage of net sales, indicating effective cost control.
- Net income attributable to Costco rose by 12.2% to $1.46 billion, with diluted EPS at $3.30.
- The company repurchased approximately $641 million worth of its common stock and authorized an additional $4 billion for future repurchases.
- Costco began consolidating its Mexico joint venture operations, increasing total assets and revenue.
- The company announced a planned CEO transition, with W. Craig Jelinek set to succeed James D. Sinegal.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, Costco Wholesale Corp kept $0.02.
- Revenue$88.92B100.0%
- Cost of revenue−$77.74B87.4%
- Gross profit$11.18B12.6%
- Operating costs−$8.74B9.8%
- Operating income$2.44B2.7%
- Interest, other & tax−$977.0M1.1%
- Net income$1.46B1.6%
Where FY2011 revenue went
$88.92B- Cost of revenue: $77.74B, 87% of revenue
- Net income: $1.46B, 1.6% of revenue
- SG&A: $8.69B, 9.8% of revenue
- Interest, other & tax: $977.0M, 1.1% of revenue
Kept 1.6% as net incomeNet income $1.46B · 1.6%Interest, other & tax $977.0M · 1.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed October 14, 2011Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $88.92B$77.95B | +14.1% |
| Cost of Revenue | $77.74B$68.00B | +14.3% |
| Gross Profit | $11.18B$9.95B | +12.3% |
| SG&A Expenses | $8.69B$7.85B | +10.7% |
| Operating Income | $2.44B$2.08B | +17.4% |
| Interest Expense | $116.00M$111.00M | +4.5% |
| Net Income | $1.46B$1.30B | +12.2% |
| EPS (Basic) | $3.35$2.97 | +12.8% |
| EPS (Diluted) | $3.30$2.92 | +13.0% |
| Shares Outstanding (Basic) | 436.12M438.61M | −0.6% |
| Shares Outstanding (Diluted) | 443.09M445.97M | −0.6% |
05—Questions
Frequently Asked Questions
What was the main driver of Costco's sales growth in fiscal year 2011?
The primary driver of sales growth was a 10% increase in comparable warehouse sales, meaning stores open for at least a year saw higher sales. This was supplemented by the revenue generated from 20 newly opened warehouses during the fiscal year. Favorable foreign currency exchange rates and rising gasoline prices also contributed positively to net sales.
How did Costco manage its expenses in 2011?
Costco demonstrated strong expense management, with Selling, General, and Administrative (SG&A) expenses decreasing by 31 basis points as a percentage of net sales. This indicates that the company was able to increase sales more efficiently than its operating expenses grew.
What is the significance of the consolidation of the Mexico joint venture?
Effective for fiscal year 2011, Costco began consolidating its 50%-owned Mexico joint venture. This means Mexico's financial results are now fully included in Costco's consolidated financial statements. While this increased total assets and revenue by approximately 3%, it had no impact on net income or earnings per share attributable to Costco, as the partner's share is accounted for as noncontrolling interests.
How is Costco returning value to shareholders?
Costco is returning value through two main avenues: share repurchases and dividends. In fiscal year 2011, the company repurchased approximately $641 million of its stock and its Board of Directors authorized an additional $4 billion for future repurchases. Additionally, the quarterly cash dividend was increased from $0.205 to $0.24 per share, resulting in total dividends per share of $0.89 for the year.
06—Continue