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     Kubang Celebrity Bewarse Username: Kubang Post Number: 40776 Registered: 09-2011 Posted From: 161.141.1.1 Rating: N/A |
This self-reinforcing business model is underpinned by nearly 94 million loyal cardmembers who pay annual fees (which drive nearly three fourths of the firm's operating profit annually) to access Costco’s low-price products. In our view, customer shopper frequency is likely heightened because consumers want to justify these fees. We believe Costco's competitive advantage lies not only in its brand's strength (as customers associate the banner with low prices), but also in the pricing power that its membership fees command. For instance, the company raised its annual charges by 10% in 2012 and 2017, but member retention rates held around 90%, suggesting that cardmembers aren’t driven away by periodic hikes. Further, total cardmembers increased 5% in 2012, in line with historical averages, a testament to the value proposition the company offers and reinforcing our view that the company benefits from an intangible asset-based moat. We believe Costco's intangible asset and cost advantages should continue to allow Costco to generate returns in excess of its cost of capital for 20 years, which leads to our wide moat rating. Ignorance is bliss |