Costco 2010 Annual Report Download - page 4

December 13, 2010
Dear Costco Shareholders,
We are pleased to report our fiscal 2010 results and discuss with you our outlook for fiscal 2011 and
beyond. Clearly, the past two years have signaled unparalleled challenges for all of us in the business
world; but 2010 provided somewhat of a comeback for Costco. Despite the fragile economic conditions
in many of our key markets, most notably California, Arizona, Nevada, Florida and the United Kingdom,
2010 produced a record year for Costco in terms of sales and earnings.
We achieved sales of $76.3 billion in 2010, an increase of nine percent from last year’s $69.9 billion; and
comparable sales in warehouses open more than a year were up seven percent. Costco’s net earnings
for fiscal 2010 exceeded $1.3 billion; and our earnings per share (EPS) increased 18% over the prior
year – to $2.92, also an all-time high. While our sales and earnings benefited from stronger foreign
exchange rates in nearly all the countries in which we operate, particularly in Asia and Canada, as well
as from inflation in the price of gasoline, we firmly believe that Costco is doing a lot of things right.
This is well illustrated in a recent survey in which more than 30,000 shoppers rated Costco as the most
excellent value among America’s most popular retail chain stores. Our members constantly communicate
that they love shopping at Costco. We continue to present great theatre and outstanding values
packaged in a treasure hunt atmosphere, which we are convinced makes Costco a fun place to shop.
Even as the economy remained uncertain in 2010, our members shopped our warehouses an average
of 4.3% more often and spent about 2.5% more on each visit than they did in 2009. Fifty-six of our
warehouses exceeded $200 million in sales in fiscal 2010, and two of these units each did more than
$300 million. This rate of revenues per building stands out in the retail industry and results from our
ongoing focus on value – that combination of quality and price – that enforces our mission to delight
our members by continually providing them with a wide range of quality goods and services at the
lowest possible prices.
Costco entered the current recession in a very solid financial position. We have always had, and
continue to have, a strong cash flow and healthy balance sheet. These enabled us to expend nearly
$2 billion in fiscal 2010 for capital expenditures, quarterly dividend payments, and repurchases of our
common stock.
In fiscal 2010 we spent nearly $1.1 billion for capital expenditures – for the construction and opening of
new warehouses and depots, as well as renovations to a number of our existing buildings. Costco will
end calendar year 2010 with 582 warehouses in operation around the world: 425 in the United States
and Puerto Rico, 80 in Canada, 22 in the United Kingdom, 32 in Mexico, nine in Japan, seven in
Korea, six in Taiwan and one in Australia. The demand for Costco quality goods remains strong all
over the globe, and we have established an ambitious goal of growing to more than a thousand
warehouses world-wide over the next ten to twelve years. In addition to infills and expansion in the
countries in which we currently operate, we are evaluating additional countries for future openings.
We opened 14 new units in fiscal 2010, compared with 20 in 2009 and 25 in 2008. All of the 2010
openings were infill buildings in existing U.S. and Canadian markets and included two relocations:
Warrenton, Oregon, which went from a small-sized Costco (72,000 square feet) to a full-size building
(139,000 square feet); and Redwood City, California, an on-site relocation, replacing an aging facility
and adding a gas station. Other fiscal 2010 warehouse openings included: Paradise Valley, Arizona;
Colorado Springs West, Colorado; Manchester, Missouri; Strongsville, Ohio; Hayward and Pacoima,
California; Saint John, New Brunswick; Manhattan and Rego Park, New York; Roseburg, Oregon;
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