Costco 2009 Annual Report Download - page 4

December 11, 2009
Dear Costco Shareholders,
Since we opened our doors twenty-six years ago, our Company mission has been “to continually
provide our members with quality goods and services at the lowest possible prices.” This commitment
has never been more relevant than today, and nearly 60 million card-carrying members have benefited
from this promise every time they shop at any of Costco’s 566 warehouses around the globe or at our
Ecommerce web sites.
Costco’s unique approach to merchandising, operations, and employee engagement has proven
successful again and again, ever since we opened our first warehouse in downtown Seattle. Fiscal
2009 provided an opportunity to test our mettle in an unusually challenging economy. We’re sure many
of you would agree that the current global recession is the worst financial crisis since the Great
Depression of the 1930s. While our sales and profits were less than in fiscal 2008, Costco remained
solidly profitable in fiscal 2009. During the past fiscal year we opened twenty new warehouses; we
increased our membership cardholder base by 2.3 million members, with membership renewals
remaining strong at over 87%; and our employees continued to have job security along with one of the
best wage and benefits packages in the retail industry.
Fiscal 2009 was the first time in our history when sales did not achieve record highs. Sales were $69.9
billion, a 1.5% decrease from 2008’s results, and for the first time we reported a year of negative
comparable sales in warehouses open more than a year: – 4% in 2009. Net earnings again exceeded
$1 billion, but were down from the previous fiscal year by 15%.
We have always maintained that truly great companies should build market share in tough times.
During the fiscal year, Costco rose from the fifth-largest U.S. retailer in 2008 to the third-largest in
2009; and we remained the ninth-largest retailer in the world. We also moved from the 29th spot in the
Fortune 500 to number 24. In addition, in 2009 we were named the 22nd most admired company in the
world by Fortune magazine, and we remained at the top of the University of Michigan’s American
Consumer Satisfaction Index, a reflection of how well we keep our promise to Costco shoppers.
Our potential for expansion remains as strong as ever. The demand for quality goods and services in
Costco’s treasure-hunt atmosphere continues to grow, both in the U.S. and around the world, even in
times of economic stress. From Texas to Taiwan, people are clamoring for a Costco warehouse in their
community. The success of our operations is world-wide; in fact, of our top 20 warehouses for sales in
fiscal 2009, half of them were outside the United States.
In fiscal 2009, capital expenditures totaled nearly $1.3 billion, including the construction and opening of
new warehouses and depots, as well as the remodeling and upgrading of many of our existing
warehouses. We opened twenty new warehouses in fiscal 2009, including three Business Centers
(Commerce and Hawthorne, California and Las Vegas, Nevada), as well as a warehouse we relocated
in Bloomfield, Michigan. Almost all of our new U.S. locations were opened in existing markets, and
included: Rockwall (Dallas) and Houston (Galleria), Texas; Kapolei, Hawaii; Lakewood, California; St.
Charles, Illinois; Brandywine, Maryland; Covington, Washington and Pocatello, Idaho.
Internationally we opened eight new warehouses, which included two new units in Canada – in
Peterborough, Ontario, 78 miles from Toronto, and Dartmouth, Nova Scotia, part of the Halifax urban
core. In England, we opened a warehouse in the city of Croyden, which is part of greater London. In
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