Costco 2013 Annual Report Download - page 4

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2
December 16, 2013
Dear Costco Shareholders,
In September 1983, Costco opened its first warehouse in Seattle with plans for a
regional warehouse club operation in the Pacific Northwest. Thirty years later, Costco is
a multi-billion dollar global retailer with 648 membership warehouses in eight countries,
delivering record sales this past fiscal year of nearly $103 billion and net earnings of
more than $2 billion. We are pleased to review our fiscal year 2013 performance with
you, and discuss our plans for 2014 and beyond.
Our fiscal 2013 performance for the year ended this past September 1st, was the direct
result of the efforts of our 184,000 employees worldwide working to fulfill our mission of
delivering high quality goods and services at the best possible value. Proudly, Costco
accomplished this while adhering to a set of core principles, which we call our Code of
Ethics, set forth at the Company’s founding: Obey the Law; Take Care of our Members;
Take Care of our Employees; Respect our Suppliers; Reward our Shareholders.
Costco’s fiscal 2013 operating performance included the following highlights:
Net sales for the 52-week fiscal year increased 6% to $103 billion, exceeding
$100 billion for the first time in Company history. Our average annual sales per
warehouse increased to $160 million.
Membership fees increased 10 percent, the result of several factors: a continuing
benefit from raising our annual membership fees in November 2011 for the first
time in more than five years; strong new member sign-ups, particularly in a
number of our international openings; increasing numbers of Executive
Members; and continuing strong membership renewal rates (at 90 percent in the
U.S. and Canada, and 86 percent worldwide).
Gross margin (net sales less merchandise costs) increased seven basis points
as a percent of net sales, even as we continued to invest in lowering prices to our
members. We maintained our pricing authority in all markets where we operate
by ensuring our members receive outstanding values – high quality at great
prices – each and every time they shop at Costco.
Our SG&A expenses increased just one basis point as a percent of sales,
despite increasing cost pressures in employee benefits, workers’ compensation,
stock compensation expenses, and the costs associated with a major effort,
currently underway, to modernize our global IT systems and infrastructure.
We returned nearly $3.6 billion to our shareholders, primarily in the form of
dividends, including a special cash dividend of $7.00 per share (totaling $3.05
billion) in December 2012.
Net income increased 19 percent in 2013 to more than $2 billion, or $4.63 per
share, compared to $1.7 billion, or $3.89 per share in 2012. Excluding a one-