Costco 2006 Annual Report Download - page 5

In the U.S., our 2006 openings included infills in the following existing markets: San Luis Obispo, La
Habra, SW Bakersfield and Lake Elsinore, California; Cave Creek, Chandler and SE Gilbert, Arizona;
West Bountiful and Lehi, Utah; Centennial and Sparks, Nevada; Lacey, Washington; Hillsboro, Oregon;
Nampa, Idaho; S. Austin and Duncanville, Texas; Buford, Georgia; and Pembroke Pines, Florida. We
entered a new market in North Carolina, opening in the city of Wilmington; and we placed our fourth
unit in Puerto Rico, in East Bayamon. We also relocated warehouses in Kalispell, Montana and
Sequim, Washington to new, improved and larger facilities.
Our international expansion continues at a steady pace. We opened three new infill warehouses in
Canada last year: Kanata, Ontario in the Ottawa suburbs; and Sherwood Park (Edmonton) and
Northwest Calgary, Alberta. Our Gatineau, Quebec warehouse, just across the river from Ottawa, was
relocated to a larger facility. We also entered two new markets in England: Sheffield in the north of the
country and Milton Keynes in the southeast. In Mexico, we opened in Juarez, just across the border
from El Paso, Texas, and in Veracruz on the Gulf coast.
Our ramped-up expansion plans for fiscal 2007 call for the opening of 36 to 40 new warehouses,
including two relocations. Most of these will be in existing markets, and we are off to a running start.
Prior to the end of calendar 2006 we opened units in Kauai, Hawaii; Gypsum, Colorado; Raleigh, North
Carolina; Louisville, Kentucky; Maple Grove, Minnesota; W. Nashville, Tennessee; Helena, Montana;
and Columbus, Ohio. Additional infill warehouses were opened in Marysville, Washington; Cumberland
Mall, Georgia; Fontana, California; La Quinta, California; and Orland Park, Illinois.
Internationally, we have opened four new warehouses so far in fiscal 2007, all in existing markets. In
Canada, we opened a unit in downtown Vancouver, British Columbia, and in Boisbriand, Quebec, on
the outskirts of Montreal. In Mexico, we opened a new building in Toluca, near Mexico City; and our
early-December opening in Chester, England concluded our calendar 2006 openings.
Our merchandise distribution infrastructure was enhanced in fiscal 2006, with the opening of large
depot facility in Salt Lake City, Utah, that services Costco warehouses in the mountain states.
Additionally, expansions were completed at our depots in Langley, British Columbia, St. Bruno,
Quebec, and Mira Loma, California to achieve greater distribution efficiencies.
The number of Costco members continued to grow in fiscal 2006. With more than 47 million loyal
cardholders, we continued our strong member renewal rate at nearly 87%. Our members know that
they can always find the highest-quality products at the best value at Costco. But that is only part of
what they love about our company. It is the thrill of the hunt (we call this our “treasure hunt”) that they
come for – always aware that we will have something new, exciting and novel they might find in the
next aisle – things like Prada handbags, Callaway golf clubs, or a $12,000 tree house.
Our members know that Costco membership is worth more, and they are quite willing to pay for it.
More and more members are taking advantage of the great benefits and services offered by our
Executive Membership, at $100 a year, and enjoy the 2% reward (up to $500) they receive each year
on their qualified purchases. We raised our membership fees for our Gold Star and Business
Memberships by $5 in April (for member renewals in July). The incremental annualized income from
this increase is $75 million, which we will realize over the next two years. Overall in fiscal 2006 we took
in $1.1 billion in membership fees. These membership funds are always used to make Costco more
competitive in the marketplace.
The partnerships we have built with our suppliers are key to our ability to provide our members with the
quality and value that they have come to expect from Costco. Our reputation for being tough
negotiators is well earned; but at the same time our suppliers know that we will always treat them fairly
and honestly. Together, we work hard to continually improve the quality of our merchandise while
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