Costco 2008 Annual Report Download - page 12

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 making payments 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 as compared to name brand items.
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 three 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. References to 2008 and 2007 relate to the 52-week fiscal years
ended August 31, 2008 and September 2, 2007, respectively. References to 2006 relate to the
53-week fiscal year ended September 3, 2006.
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 lower 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). 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, for an annual fee of $50, which includes a spouse card.
Our membership base was made up of the following (in thousands):
2008 2007 2006
Gold Star ................................. 20,200 18,600 17,300
Business ................................. 5,600 5,400 5,200
Total primary cardholders ................ 25,800 24,000 22,500
Add-on cardholders ........................ 27,700 26,400 25,200
Total cardholders .......................... 53,500 50,400 47,700
These numbers exclude approximately 2,800, 2,700 and 2,600 cardholders of Costco Mexico at the
end of 2008, 2007 and 2006, respectively.
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