Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)
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RET AILING TODA Y On a roll COSTCO PLANS TO DOUBLE ITS STORE COUNT AND SALES WITHIN 15 YEARS By Beth Mattson-Teig C MONCTON, NEW BRUNSWICK, CANADA 100 SCT / MAY 2012 has opened about 400 stores in the U.S. and Puerto Rico, and nearly 170 in Canada, Mexico and other coun- tries. Moreover, the retailer says it plans to double its store count and earnings over the next 12 to 15 years. Costco relies on lean margins and OSTCO APPEARS TO HAVE done well during the economic downturn by appealing to price- conscious consumers in the U.S. and around the globe. The chain has managed to log steady year-over-year increases in membership, store openings and sales. Net sales alone have increased 38 percent since 2007, to $87.1 billion at the end of fiscal 2011. Issaquah, Wash.–based Costco, the largest wholesale membership club, is also one of the top-grossing retailers in the U.S., generating some $7 billion in net sales per month. Since its founding in 1983, Costco good expense management to pass on low prices to its club members. The no- frills warehouse format expends little capital on the usual retail fare — store decor, fancy merchandising displays or even shopping bags. "They provide a really great low price on a limited number of SKUs [stock-keeping units] that tend to be categories that people care a lot about," said Daniel Binder, a managing director at equity investment firm Jefferies & Co. Costco stores typi- cally measure about 130,000 square feet but carry fewer than 5,000 SKUs; the focus is on getting people to buy in bulk. "They are good merchants and have a lot of compelling products, in- cluding a lot of national brands that they sell for lower than what people can buy them for elsewhere," he said. Costco offers shoppers a treasure hunt by constantly bringing in value- priced items, says David Strasser, a managing director at equity investment firm Janney Montgomery Scott. Costco also makes an important distinction of selling high-quality items at value prices rather than inferior products at cheap prices, he says. "You know you are getting value, because their gross margin is so low," said Strasser. Costco's gross margins on merchandise average 10.5 percent, well below even Walmart's nearly 25 percent margins. Costco is able to deliver those