Costco: A Wholesale Bull
Winding through the aisles of Costco, midday on a Saturday lunch hour, snatching up free samples of packaged meals, meats, and other items on display, is a common trend for most bulk shoppers. Those who have ever frequented the mass gathering of this growing bulk product sales giant understand that Costco is different than other bulk product companies. It has a growth unchallenged by others in the wholesale bulk product industry and is a solid competitor. Solid even in financially strenuous times, such as the recent economic recession. In market terms, Costco is a bull! It is strong, dependent, and consistently growing. This can be proven by breaking down its most recent financial reports.
Breaking down the financial reports begins with the companies balance sheets over the last five years respectively reported. In 2013 the sales revenue was at an all-time high of 105.16 billion dollars. That was an increase of 6.07% from the previous year’s 99.14 billion, which was an increase of 11.49% of the previous year’s 88.92 billion. All in all, sales revenue increased at an average rate of 10.19% annually over the last five years. These kinds of stats are clearly evident in defining that Costco is on the up and up, but they are not the only stats that matter. The assets, cash and cash equivalents, accounts payable, total current assets, and net income are all predominately strong and each takes an integral part in projecting strong future gains for the company and its investors.
The company’s total assets at the end of fiscal year 2013 were 30.28 billion. This kind of information shows that the company not only has a large amount of capital invested in its assets, but that it has grown over the past year. The previous year’s assets were 27.14 billion. The most likely increase came from acquisitions and mergers of Costco’s expanding international market. Recently purchased holdings in Mexican franchises and other corporations outside the U.S. have definitely played a role in explaining the steady increase over the last year. Costco’s total current assets are stated as 15.8 billion and previous year total current assets were stated as 13.5 billion. Both of these were affected more by the inventory and net receivables than by its cash and cash equivalents; which have been steady at around 4 billion over the last three years. This shows Costco’s monetary assets are not necessarily increasing, but more of the product and receivable assets that are steadily growing. Future plans to put another 150 of its membership warehouse clubs throughout the world in the next five years will help to maintain continued growth of the company’s total assets.
The current asset worth compared to current liabilities shows that Costco is in the positive. Last year Costco had an accounts payable statement of 11 billion. This was its highest current, or “short term”, liability for the year. The total liabilities, short and long term, came to 19.45 billion. This shows a three/two ratio of Costco’s asset value to total liabilities. With this information it is easy to see that the corporation could easily pay off its debt and is in good standing with all of its creditors. With the previous year’s accounts payable at a statement of 10.2 billion, the total current liabilities are not out of the normal operating limits. No red flags here. Now onto the good stuff.
The most informative portion of Costco’s balance sheet is the net income portion; the residual value of revenues and gains over the total losses and expenses. This is commonly known in the business community as the bottom line. So how does Costco pan out? Its net income was stated as a positive increase of growth to the tune of 2.04 billion dollars. This was 19.31% higher than the previous year’s 1.71 billion. In any terms, it is a lot of money. Its current dividend percentage took a dive from an average of 13.3%…