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     Kubang Celebrity Bewarse Username: Kubang Post Number: 36568 Registered: 09-2011 Posted From: 161.141.1.1 Rating: N/A |
Our BUY recommendation is consistent with our longstanding regard for steady-growth retailers with dominant market positions. Approximately 72% of the company's FY16 operating income came from membership fees. This revenue stream adds stability to earnings, which stands out in the volatile retail sector. Costco remains one of our favorite merchants, and we think the company has one of the best management teams in all of retail. We believe that the company's constant effort to deliver low prices keeps it relevant at a time when shoppers are looking for online bargains. The fact that more than 50% of sales come from food and sundries also makes Costco less vulnerable to internet competition. That proposition is now being questioned with Amazon's purchase of Whole Foods. AMZN is a relentless competitor and they are willing to operate at low margins, but there is currently a big difference between the AMZN operating model and the COST model. Amazon sells approximately 480 million SKUs according to some media reports. Costco warehouses sell approximately 4,000 that are very carefully selected and curated. The percentage of fresh foods at Costco raises the challenge for competitors. Sales of fuel are also insulated from internet competition, and Costco's low gasoline prices help to drive store traffic and reinforce the value of membership. Strong traffic and business renewals in North America illustrate the importance of Costco to paying members. We expect continued sales and EPS growth given the company's focus on innovation to maintain its competitive edge: selling products at lower prices. Ignorance is bliss |