Costco 2007 Annual Report Download - page 5

In fact, the Costco concept has translated well around the world, and we continue our successful
international expansion. In fiscal 2007, we opened three warehouses in Canada: one each in the
Toronto, Montreal and Vancouver markets. In Mexico, we opened the Toluca warehouse in the greater
Mexico City market; and in the U.K. we entered the Chester, England market, which is on the border
with Wales. In Japan we opened our first warehouse in the city of Kawasaki, part of the greater Tokyo-
Yokohama metroplex. In addition, since the beginning of the new fiscal year, we have opened five new
warehouses outside the U.S.: one in Taichung, Taiwan and four in Canada – in Candiac, Quebec;
Richmond Hill, Ontario; Winnipeg, Manitoba; and Medicine Hat, Alberta. Overall, as of this writing, we
are operating 529 warehouses around the globe.
Key to our operating efficiencies are our state-of-the-art merchandise distribution facilities. Costco’s
“depots”, handling over 80% of our product through-put and occupying more than 6.5 million square
feet of space, provide us with an important competitive operating advantage. In fiscal 2007, we
enlarged and improved two of our Canadian depot facilities – St. Bruno, Quebec and Brampton,
Ontario – in order to more efficiently serve our Canadian warehouses. In fiscal 2008, we plan to spend
nearly $150 million upgrading and expanding several other depot operations.
Costco’s membership base rose from 48 million cardholders at fiscal year-end 2006 to over 50 million
cardholders at this fiscal year-end. Many of these additions are Executive Members, who pay $100 per
year to take advantage of additional benefits and services, as well as reap a 2% annual reward (up to
$500) on their qualified purchases at Costco. Overall, we collected $1.4 billion in cash membership
fees in fiscal 2007.
Taking good care of our members is a business imperative at Costco; and we believe it is critical that
we make good on the implicit promise of quality and value that Costco shoppers have come to expect.
This commitment starts with our Mission Statement: “To provide our members with the highest quality
goods and services at the lowest possible prices;” and we pursue this mission with a passion every
day, by partnering with many of the most respected companies in the world to provide our members
with a wide range of top quality merchandise. To ensure an ever-changing array of exciting, high-
quality products, we constantly seek new partnerships and “best of” global suppliers. This past year we
are pleased to have established direct relationships with many outstanding new suppliers, such as
NordicTrack, Electrolux, Callaway, Keurig Coffee Makers, Capresso, Pallina and Helen Welsh
handbags, and Hallmark.
There are many elements that go into making high-quality products, and safety is certainly one of
them. We work tirelessly with our suppliers on many levels to ensure the kind of high-quality products
that Costco is committed to providing its members. This includes tight scrutiny of products made
outside the United States, particularly in light of recent incidents involving toys, certain health and
beauty aids and other items. And we are not satisfied with high quality and safety alone. We make a
concerted effort to consider the environmental impact and fair trade issues, among other
considerations, in the growth, manufacture and packaging of the products we sell. For example, a new
line of Kirkland Signature origin-specific, fair-trade coffee is grown with sustainable agricultural
practices, while providing higher prices to the “source” farmers.
Fiscal 2007 marked the 20th anniversary of introducing fresh foods departments into our warehouse
format. These signature departments are now world famous for their variety, quality and value, and
regularly bring our members in for additional shops. Fresh food sales have grown from $10 million in
fiscal 1987 to more than $7.6 billion in fiscal 2007. Today, we are the No. 1 user of U.S. choice beef
throughout the world. Last year, Costco sold more than 100 million pounds of ground beef and
40 million rotisserie chickens; and our fresh bakery produced more than 150 million croissants in fiscal
2007. In the U.S., during Thanksgiving week alone, Costco sold more than one million pumpkin pies. In
our produce department, Costco members purchased more than 100 million pounds of grapes and
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