Costco 2007 Annual Report Download - page 13

The rates for Business and Gold Star members discussed above reflect the $5 increase that went into
effect on May 1, 2006 for new members and July 1, 2006 for existing members.
Executive Membership is available to all members in the U.S. and Canada for an annual fee of $100.
The Executive Membership program offers members additional savings and benefits on various
business and consumer services offered by Costco, such as merchant credit card processing, small
business loans, auto and home insurance, business telephone service, check printing, and real estate
and mortgage services. The services offered are generally provided by third-party providers and vary
by state. In addition, Executive members qualify for a 2% reward (which can be redeemed at Costco
warehouses), up to a maximum of $500 per year, on all qualified purchases made at Costco. At the
end of fiscal 2007 and 2006, Executive members represented 23% and 20%, respectively, of our
primary membership base and the percentage of our net sales attributable to these members
continues to increase.
Labor
Our employee count approximated:
September 2,
2007
September 3,
2006
Full-time employees ........................... 70,000 66,000
Part-time employees .......................... 57,000 53,000
Total employees .......................... 127,000 119,000
These numbers exclude approximately 9,000 and 8,000 individuals who were employed by Costco
Mexico (a 50%-owned joint venture) as of September 2, 2007 and September 3, 2006, respectively,
which is not consolidated in our financial statements, but is accounted for using the equity method.
Approximately 13,900 hourly employees in certain of our locations in California, Maryland, New Jersey,
New York and one warehouse in Virginia are represented by the International Brotherhood of
Teamsters. All remaining employees are non-union. We consider our employee relations to be very
good.
Competition
Our industry is highly competitive, based on factors such as price, merchandise quality and selection,
warehouse location and member service. Over 1,200 warehouse club locations exist across the U.S.
and Canada, including our 454 North American warehouses, and every major metropolitan area has
one, if not several, club operations. In addition to other membership warehouse operators such as
Wal-Mart’s Sam’s Club and BJ’s Wholesale Club, we compete with a wide range of national and
regional retailers and wholesalers, including supermarkets, supercenters, general merchandise chains,
specialty chains, gasoline stations, as well as electronic commerce businesses. Wal-Mart, Target and
Kohl’s are significant general merchandise retail competitors. We also compete with low-cost operators
selling a single category or narrow range of merchandise, such as Lowe’s, Home Depot, Office Depot,
PetSmart, Staples, Trader Joe’s, Whole Foods, Best Buy and Barnes & Noble.
Regulation
Certain state laws require that we apply minimum markups to our selling prices for specific goods, such
as tobacco products, alcoholic beverages and gasoline. While compliance with such laws may cause
us to charge somewhat higher prices than we otherwise would charge, other retailers are also typically
governed by the same restrictions, and we believe that compliance with such laws does not have a
material adverse effect on our operations.
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