Costco 2004 Annual Report Download - page 5

Opening day sales for most of our new locations were extraordinarily high this year, some breaking previous
records set by some of our most successful buildings. In the United States, our new-market buildings were in
Hoover, Alabama; El Paso, Texas; Myrtle Beach, South Carolina and Greensboro, North Carolina. Our infill
buildings were opened in Commerce Township, Michigan; Chantilly and Leesburg, Virginia; Citrus Heights,
Turlock and Poway, California; South Ogden, Utah; Coeur d’Alene, Idaho; Vancouver, Washington; Lewisville,
Texas; Enfield, Connecticut and Lake in the Hills, Illinois. We also opened our fifth Business Center in Fife,
Washington.
The demand for American goods remains high around the world, fueling our international expansion. Two
of our three new warehouses in Mexico were in new markets (Cuernavaca and Cabo San Lucas), while adding
one in our existing high-volume market of Tijuana. Also, as we discussed at our last two shareholders’ meetings,
we opened Muros Cultural Center in Cuernavaca, Mexico, a stunning facility that houses the world-famous Jac-
ques and Natasha Gelman Collection of Modern and Contemporary Mexican Art, along with the restored murals
of Casino de la Selva. In Canada, we added two new in-fill buildings (Terrebonne, Quebec and London, Ontario).
We feel we have only begun to tap the potential of the international marketplace for Costco, and we look forward
to continued global expansion and success. So far in our Fiscal 2005 first quarter, we added our fifth Costco in
Japan; and we are preparing for a spring opening in Bristol, England, which will bring our total to sixteen Cost-
cos in the United Kingdom.
In fiscal 2005, we plan to open 22 to 25 additional new warehouses and relocate seven existing locations.
Eleven of these (including three relocations) will be operating before calendar year-end, bringing our total ware-
houses at the end of calendar 2004 to 449. Buildings opened in the Fall of 2004 were widespread geographically:
one in Illinois; one in Arizona; one in Minnesota; one in Iowa; two in Michigan; one in Mexico; and, as men-
tioned above, one in Japan. We believe the market is far from saturated. In fact, we feel confident that given re-
cent successes and market conditions, we should be able to double our present number of warehouses over the
next ten years, given the combination of U.S. and international opportunities.
We continue to look at other types of businesses that fit well within the Costco model. In fact, in October
2004 we opened our second Costco Home location adjacent to a high-volume Costco warehouse in Tempe,
Arizona. Our first Costco Home, featuring high-end furniture and accessories, has been profitable since opening
in December 2002, despite its “stand-alone” location in Kirkland, Washington. We feel the highly visible loca-
tion of our new facility will draw additional traffic, thanks to its proximity to the Tempe warehouse, perhaps giv-
ing us a model to build on for future expansion of this business in markets where we have multiple Costco
warehouses and hundreds of thousands of loyal Costco members. Our strategy, as we have mentioned before, is
two-fold—first, make it more attractive to be a Costco member; and second, learn something in these businesses
that will make all of our 449 Costcos better.
The high quality and value we offer in our ancillary businesses continue to set us apart from our competition
and bring our members in for additional shops, increasing incremental sales. Our 211 gas stations brought in
sales of $2.3 billion in 2004, an increase of 45% over 2003. We have a well-earned reputation of being the best-
priced pharmacy in every U.S. market in which we operate. Last year, we filled 18 million prescriptions and had
sales of $2.2 billion, an increase of 11% over 2003. Our food courts sold more than fifty million hot dog and soda
combinations in 2004, with our giant Kosher dogs regularly being named “Best Hot Dog” in local competitions
across the country. And our Optical, 1-Hour Photo and Hearing Aid centers are thriving operations and all
showed double-digit gains last year.
Our E-commerce business, at costco.com, continues to grow exponentially, and last year had sales of over
$375 million, an increase of 66% over the prior year. As much as costco.com has grown, we believe we have
barely touched the surface of this format, and forecast continued significant growth and leadership in the E-
commerce industry. Over the next several years we believe that costco.com, our “virtual warehouse,” can become
a $5 billion business, helping us to leverage our existing relationships with suppliers, as well as expand our
membership base.
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