Costco 2010 Annual Report Download - page 12

Costco Mexico, our 50%-owned joint venture, operated 32 warehouses at August 29, 2010. We have
contractual responsibility for executive, management and functional duties and operations of Costco
Mexico. The Costco Mexico warehouses are not included in the table above as Costco Mexico is
accounted for using the equity method of accounting for investments.
Our electronic commerce businesses, costco.com in the U.S. and costco.ca in Canada, provide our
members additional products generally not found in our warehouses, in addition to services such as
digital photo processing, pharmacy, travel, and membership services.
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 further purchases until
restitution is made.
We have direct buying relationships with many producers of national brand-name merchandise. We do
not obtain a significant portion of merchandise from any one 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
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.
Certain financial information for our segments and geographic areas is included in Note 12 to the
accompanying consolidated financial statements included in this Report.
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). The
material seasonal impact in our operations is an increased level of net sales and earnings during the
winter holiday season. References to 2010, 2009, and 2008 relate to the 52-week fiscal years ended
August 29, 2010, August 30, 2009, and August 31, 2008, respectively.
Membership Policy
Our membership format is designed to reinforce customer loyalty and provide a continuing source of
membership fee revenue. 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). Our
member renewal rate, currently at 88% in the U.S. and Canada, is consistent with recent years.
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 household membership card, with add-on membership
cards available for an annual fee of $40 (including a free household card). Many 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 household card.
Our membership base was made up of the following (in thousands):
2010 2009 2008
Gold Star ......................................... 22,500 21,500 20,200
Business ......................................... 5,800 5,700 5,600
Business, Add-on Primary ........................... 3,300 3,400 3,400
Total primary cardholders ........................ 31,600 30,600 29,200
Additional cardholders .............................. 26,400 25,400 24,300
Total cardholders .................................. 58,000 56,000 53,500
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