Costco 2007 Annual Report Download - page 12

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Our warehouses accept cash, checks, certain debit cards, American Express and a private label
Costco credit card. Losses associated with dishonored checks have been minimal as members who
have issued dishonored checks are identified and prevented from cashing checks at the point of sale
until restitution is made.
We have direct buying relationships with many producers of national brand name merchandise. No
significant portion of merchandise is obtained from any one of these or any other single supplier. We
have not experienced any difficulty in obtaining sufficient quantities of merchandise, and believe that if
one or more of our current sources of supply became unavailable, we would be able to obtain
alternative sources without experiencing a substantial disruption of our business. We also purchase
selected private label merchandise, as long as quality and customer demand are comparable and the
value to our members is greater.
Financial information of our segments and geographic areas is included in Note 12, Segment
Reporting, to the accompanying consolidated financial statements.
We report on a 52/53-week fiscal year, consisting of thirteen four-week periods and ending on the
Sunday nearest the end of August. The first, second and third quarters consist of three periods each,
and the fourth quarter consists of four periods (five weeks in the thirteenth period in a 53-week year).
There is no material seasonal impact on our operations, except an increased level of net sales and
earnings during the winter holiday season. Fiscal years 2007 and 2005 each consisted of 52 weeks,
and fiscal year 2006 was a 53-week year.
Membership Policy
Our membership format is designed to reinforce customer loyalty and provide a continuing source of
membership fee revenue, which allows us to offer low prices.
Members can utilize their memberships at any Costco warehouse location in any country. We have two
primary types of members: Business, and Gold Star (individual). In addition, U.S. and Canadian
members can upgrade to an Executive Membership. We continue to experience strong member
renewal rates, currently at 87%. Businesses, including individuals with a business license, retail sales
license or other evidence of business existence, may become Business members. Business members
generally pay an annual membership fee of $50 for the primary and spouse membership card, with
add-on membership cards available for an annual fee of $40 (including a free spouse card). A
significant number of our business members also shop at Costco for their personal needs.
Individual memberships (Gold Star memberships) are available to individuals who do not qualify for a
Business membership. Individual members generally pay an annual membership fee of $50, which
includes a spouse card.
Our membership base was made up of the following (in thousands):
September 2,
2007
September 3,
2006
Gold Star ...................................... 18,600 17,300
Business ...................................... 5,400 5,200
Total primary cardholders ..................... 24,000 22,500
Add-on cardholders ............................. 26,400 25,200
Total cardholders ............................... 50,400 47,700
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