Despite the challenging economic climate, Costco's quarterly results, released last week, showed a corporation in excellent health.
What does this mean?
The Goliath members-only retailer Costco informs investors of important indicators every month, so the quarter's 15% increase in revenues won't have surprised you much. Regardless of whether it was anticipated or not, the upturn is nonetheless amazing given the current economic situation, as is the fact that profits are up 8% even as operating costs continue to rise. (Costco paid its suppliers 8% more this year than it did at this time last year.) So far, Costco appears to have succeeded in passing along rising prices without driving away customers; when rivals Target and Walmart release their quarterly financial reports in November, we'll know whether they've done the same.
Why should I care?
One fee has remained constant in an era of growing costs: Costco's $60 yearly Gold Star membership (a discount given the deals available in the company's warehouses). Although some shareholders have complained that the charge should be increased to boost profits, Costco won't rush to change its successful formula because membership renewals are at an all-time high of 93% in the US and Canada.
The bigger picture:The Costco price index.
Costco is known for selling a ton of goods; the discounts that line the store's shelves include anything from commonplace groceries to large, 340-pound safes and vehicle tires. Because it carries such a wide variety of goods, the company maintains a close eye on the markets. According to its finance chief, there is positive news this year: the cost of fresh foods like beef and commodities like steel have slightly decreased since last year. And it appears that supply chains may be improving as well, with shipping prices falling and goods to Costco warehouses coming sooner. Customers may then heave a hesitant sigh of relief. Keep reading for our next story...
