Costco 2009 Annual Report Download - page 5

Mexico, a second unit was opened in the city of Guadalajara; and we opened three new Asia
warehouses in an exciting three-day blitz last July – in Hsinchu, Taiwan, southwest of Taipei; Shin
Misato, in greater Tokyo, Japan; and Busan, Korea’s second-largest city.
These three countries – Japan, Korea and Taiwan – provide us with great expansion opportunities.
When we opened the new warehouses in each country in early July 2009, each warehouse had
record-breaking opening day sales for its country – all well over $700,000 per warehouse. Membership
sign-ups through opening day were tremendous at each warehouse – more than 47,000 in Japan –
highlighting the potential of the Asia markets for Costco.
Our most thrilling new opening was in Australia last August, where people drove as long as five hours
to shop, and lined up to be first through the door. Our Docklands warehouse is in a revitalized area of
Melbourne, the country’s second-largest city. The Australian market is particularly well-suited to
Costco’s business model. The population is young and affluent; other retailers’ goods are expensive;
and the variety of merchandise imported from the U.S. is limited. Australians love the Costco concept
and gave us our best-ever opening day sales for a new country – more than $841,000 U.S. We plan to
open a second warehouse in Sydney, in the fall of 2010, and look forward to ongoing expansion.
We also expanded our number of Business Centers this year to seven, opening two in the Los Angeles
area – in Hawthorne and City of Commerce – and one in Las Vegas. Costco has always valued its
business members; and our Business Centers give us an opportunity to give them both walk-in and
delivery options in some of our major markets.
Despite the lower number of openings this year (twenty) compared to prior years – a reflection of
economic conditions and the difficulty of completing real estate deals – these new warehouses
averaged $100 million of sales per year on an annualized basis – the highest average for openings in
our Company’s history. Don’t judge the low number of openings as a hesitancy on our part, but rather a
reflection of turbulence in the market. We have a significant backlog of projects in the pipeline and are
striving to build our annual rate of new Costco openings to between 30-40 per year if conditions permit.
In addition to warehouse openings, we opened three new depots in fiscal 2009 – in Airdrie, Alberta in
the Calgary market; Tepeji, Mexico in greater Mexico City; and Ichikawa, Japan in the Tokyo metro
area. Our depot system, which now includes 37 state-of-the-art cross-dock facilities, is one of the most
efficient forms of merchandise distribution in the world.
As we geared up for the 2009 holiday season, we opened eight more U.S. warehouses: in Paradise
Valley, Arizona; Colorado Springs, Colorado; Manhattan, New York; Manchester, Missouri;
Strongsville, Ohio; Hayward, California; reopened Redwood City, California; and relocated Warrenton,
Oregon. All of these were infills in existing markets.
We currently operate 566 warehouses across the globe: 413 in the U.S. and Puerto Rico, 77 in
Canada, 32 in Mexico, 21 in the United Kingdom, nine in Japan, seven in Korea, six in Taiwan and one
in Australia. Our goal is still to double our number of units over the next ten years, and we believe this
is possible despite the current economic climate.
Our merchandising strategy is a key component to our success, and it is basically the same today as it
was at our inception: to bring quality goods and services to our members at the lowest possible prices.
Our goal is always to enhance value – that particular combination of quality and price – that makes us
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