COSTCO WHOLESALE CORP /NEW Annual Report, Year Ended Aug 28, 2016

Costco Wholesale Corporation (COST) filed its 10-K for the fiscal year ended August 28, 2016, detailing its business operations, financial performance, and strategic outlook. The company continued its expansion, opening 29 net new warehouses globally, bringing the total to 715, with significant growth noted in the U.S. Despite a 2% increase in net sales to $116.1 billion, comparable sales remained flat, impacted by currency fluctuations and lower gasoline prices. Membership fee revenue saw a healthy 4% increase, underscoring the loyalty and value proposition for its members. The company highlighted its strategy of offering high-quality merchandise at low prices through efficient operations and a limited SKU selection, a model that proved resilient amidst a competitive retail landscape. Financially, the company reported net income of $2.35 billion, a slight decrease from the prior year, primarily due to a prior year tax benefit. Gross margin percentage improved due to the impact of gasoline price deflation, though selling, general, and administrative (SG&A) expenses as a percentage of sales also increased, partly due to IT modernization investments. Costco maintained a strong liquidity position, with substantial cash and investments, and continued its capital expenditure program for new warehouses and infrastructure. The report also detailed risks such as dependence on U.S. and Canadian markets, competition, and the importance of maintaining membership loyalty.