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Their margins are high like the others because many households renew memberships each year but do not make much use of them. I also think their membership does
by krustyburger 8y ago
Their margins are high like the others because many households renew memberships each year but do not make much use of them. I also think their membership does skew more affluent than many other retailers.
- ghaff 8y agoOperating costs for a store are also significantly less than a retailer like Walmart that has many, many more SKUs to stock.
- refurb 8y agoThat the key. Plus their stores are warehouses, so maintaining the store is pretty much keeping product on shelves and keeping the floor clean.
- baddox 8y agoWouldn’t an unused membership be worse (for Costco) than a used membership? Perhaps barring some rare edge cases like customers who would only buy loss leaders, or stores that are congested with shoppers.
- cestith 8y agoCostco actually sells most products at or near cost. Most of their profit is in memberships. https://www.fool.com/investing/2017/05/05/how-costco-wholesale-corporation-makes-most-of-its.aspx https://www.fool.com/investing/2017/05/05/how-costco-wholesa...
- baddox 8y agoInteresting point, I wouldn't have guess that. Although, it sounds like they would still rather their members buy products, based on this sentence: > If you examine the company's sales, it brought in $56.59 billion in net sales with a merchandise cost of $50.21 billion and sales expenses of $5.92 billion. I don't think that sales expenses would vary much depending on how many members were buying products.