Costco 2012 Annual Report Download - page 32

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Changes in foreign currencies relative to the U.S. dollar negatively impacted membership fees in 2012
by approximately $10.
2011 vs. 2010
Membership fees increased 10.4% in 2011 compared to 2010. Excluding membership fees from
Mexico (not consolidated in 2010), the increase would have been 8.3% in 2011. This increase was due
to the higher penetration of our higher-fee Executive Membership program and the additional
membership sign-ups at the 20 net new warehouses opened during 2011.
Changes in foreign currencies relative to the U.S. dollar positively impacted membership fees by
approximately $30 in 2011, primarily due to the positive impacts of the Canadian dollar of $17.
Gross Margin
2012 2011 2010
Net sales .................................... $97,062 $87,048 $76,255
Less merchandise costs ....................... 86,823 77,739 67,995
Gross margin ................................ $10,239 $ 9,309 $ 8,260
Gross margin increase ........................ 10.0% 12.7% 9.4%
Gross margin as a percent of net sales ........... 10.55% 10.69% 10.83%
2012 vs. 2011
Gross margin as a percent of net sales decreased 14 basis points compared to 2011. Gross margin for
core merchandise categories (food and sundries, hardlines, softlines, and fresh foods) decreased 21
basis points, primarily due to decreases in hardlines and food and sundries resulting from our
investment in merchandise pricing. Excluding the effect of gasoline price inflation on net sales, gross
margin for core merchandise categories decreased 13 basis points. The gross margin comparison was
positively impacted by eight basis points due to a $21 LIFO inventory charge in 2012 compared to an
$87 LIFO charge recorded in 2011. The LIFO charge resulted from higher costs for our merchandise
inventories, primarily food and sundries and gasoline. Increased penetration of the Executive
Membership 2% reward program negatively impacted gross margin by two basis points due to
increased spending by Executive Members. Changes in foreign currencies relative to the U.S. dollar
negatively impacted gross margin by approximately $64 in 2012, primarily due to the negative impacts
of the Canadian dollar and Mexican peso of approximately $33 and $29, respectively.
2011 vs. 2010
Gross margin as a percent of net sales decreased 14 basis points compared to 2010. Gross margin for
core merchandise categories, when expressed as a percent of core merchandise sales rather than
total net sales, increased 18 basis points, primarily due to hardlines and food and sundries. However,
when the core merchandise gross margin is expressed as a percentage of total net sales, it decreased
two basis points from the prior year due primarily to the increased sales penetration of the lower-
margin gasoline business. Warehouse ancillary and other businesses gross margins decreased by two
basis points as a percent of total net sales. The gross margin comparison was also negatively
impacted by $87 or 10 basis points, due to a LIFO inventory charge recorded in 2011. The charge
resulted from higher costs for our merchandise inventories, primarily food and sundries and gasoline.
There was no LIFO inventory charge recorded in 2010.
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