10-KPeriod: FY2015

COSTCO WHOLESALE CORP /NEW Annual Report, Year Ended Aug 30, 2015

Filed October 14, 2015For Securities:COST

Summary

Costco Wholesale Corporation (COST) presents its 2015 10-K filing, detailing a year of steady growth and strategic initiatives. The company continued its expansion by opening 23 net new warehouses, contributing to a 3% increase in net sales to $113.7 billion. This growth was driven by sales at newly opened locations and a 1% rise in comparable warehouse sales, despite headwinds from foreign currency fluctuations and lower gasoline prices. Membership fees, a crucial revenue stream, saw a 4% increase, reflecting strong member loyalty and upgrades to the Executive membership program, which consistently outperforms standard memberships. The company's core strategy of offering high-quality merchandise at low prices, coupled with operational efficiencies and a robust private-label offering (Kirkland Signature), continues to resonate with its expanding customer base. While facing intense competition and general economic uncertainties, Costco's business model remains resilient, supported by a strong balance sheet and consistent cash flow generation, enabling ongoing investments in expansion and shareholder returns.

Financial Highlights

49 data points
Beta

Revenue

$116.20B

13.0% Gross Margin

Net Income

$2.38B

2.0% Net Margin

EPS (Diluted)

$5.37

Total Assets

$33.02B

Cash & Equivalents

$4.80B

Free Cash Flow

$1.89B

Financial Statements
Beta
Revenue$116.20B
Cost of Revenue$101.06B
Gross Profit$15.13B
SG&A Expenses$11.45B
Operating Income$3.62B
Interest Expense$124.00M
Net Income$2.38B
EPS (Basic)$5.41
EPS (Diluted)$5.37
Shares Outstanding (Basic)439.45M
Shares Outstanding (Diluted)442.72M

Key Highlights

  • 1Net sales reached $113.7 billion, a 3% increase year-over-year, primarily driven by new warehouse openings and comparable sales growth.
  • 2Membership fee revenue grew by 4% to $2.53 billion, highlighting strong member retention and the appeal of the Executive membership program.
  • 3Costco opened 23 net new warehouses in fiscal year 2015, continuing its strategic expansion in both domestic and international markets.
  • 4Comparable warehouse sales increased by 1%, with a core comparable sales growth of 7% when excluding the impact of foreign currency changes and gasoline prices.
  • 5Gross margin percentage improved by 43 basis points to 11.09%, partly due to gasoline price deflation and positive contributions from ancillary businesses.
  • 6Net income increased to $2.38 billion, or $5.37 per diluted share, showing improved profitability over the prior year.
  • 7The company initiated a new $4 billion share repurchase program and increased its quarterly cash dividend, demonstrating a commitment to returning capital to shareholders.

Frequently Asked Questions

Costco's primary growth driver in fiscal year 2015 was a combination of sales from newly opened warehouses and a 1% increase in comparable warehouse sales. The company also experienced a 7% comparable sales growth when excluding the impacts of foreign currency fluctuations and gasoline prices, indicating underlying business strength.

Membership fees are a significant and growing revenue stream for Costco. In fiscal year 2015, membership fee revenue increased by 4% to $2.53 billion. This growth is attributed to new member sign-ups and a higher number of upgrades to the Executive Membership program, which offers enhanced benefits and typically leads to higher spending by members.

Costco identified several key risks, including its heavy reliance on U.S. and Canadian operations (particularly California), potential failures in executing its growth and expansion strategies, maintaining membership loyalty and brand recognition, disruptions in its distribution network, reliance on information systems, and competition from other retailers. Geopolitical and economic factors, foreign currency fluctuations, and commodity price volatility were also noted as risks.

In fiscal year 2015, Costco generated strong cash flow from operations, enabling it to fund capital expenditures for new warehouses and information systems. The company also returned capital to shareholders through a special cash dividend of $5.00 per share, an increase in its regular quarterly dividend, and the authorization of a new $4 billion share repurchase program. Outstanding debt remained manageable, with a focus on financing growth through operational cash flow and existing cash reserves.