U.S. Consumer Staple
Market
Presenters
Industry:
Target:
Wal-Mart:
Costco:
Jim Shi
Chris Yoo
Doug Huxter
Wendy Choi
Consumer Staples

Definition:
– Include any company that manufactures and
sells food/beverages, tobacco, prescription
drugs and household products
– Includes following industry
 Food
& Drug Retailing
 Food & Beverage & Tobacco
 Household & Personal Products
– E.g. Proctor & Gamble, Coca Cola, Wal-mart
Types of Retailers

Department stores
– Wide variety of products
– Ex. Sears

Demographics
– Stores aimed at certain segment
– Ex. Gap

Discounters
– Membership club or low priced variety store
– Ex. Costco Wal-mart
Porter’s 5 Forces
 Low
Threat of new entrants:
– Large concentration of retail chain
stores
– Decreasing number of independent
retailers
– Barriers to entry
 Favorable
supply contract: centralized
buying power
 Favorable lease contract
 Requires large amounts of capital
Porter’s 5 Forces (cont’)


Suppliers’ power: limited power to negotiate
relatively to large retail chain stores
Buyers’ power:
– Individuals with limited purchasing power
– collectively, customers can demand high quality products
at a bargain price;
Porter’s 5 Forces (cont’)


Substitute threat: high, products offered
in one retail chain are available in others
Rivalry: slow market growth leads to
fierce price competition
Historical Trend
U.S. Retail Sales in Past 5 Years
Annual Sales (in Trillions of Dollars)
$4.20
$4.12
$4.00
$3.85
$3.80
$3.62
$3.60
$3.47
$3.40
$3.39
$3.20
$3.00
2001
2002
2003
2004
2005
Year
Annual Changes in U.S. Retail Sales for 2001-2005
$300
Chart Made Based on Data Collected from:
Title: Retail and Food Services
Series ID: RSAFSNA
Source: U.S. Department of Commerce : Census
Bureau
Release: Advance Monthly Sales for Retail and Food
Services
Seasonal Adjustment: Not Seasonally adjuted
Frequency: Monthly
Units: Millions of Dollars
Retrieved on Nov. 15/2006 at:
http://www.forecasts.org/data/data/RSAFSNA.htm
Annual % Change
7.00%
$235
6.00%
$266
$250
$200
5.00%
4.30%
4.00%
3.00%
6.91%
6.49%
$150
$149
2.19%
2.00%
$100
$74
$50
1.00%
0.00%
$0
2001-2002
2002-2003
2003-2004
Years
2004-2005
Annual $ Change (in Billions
of Dollars)
8.00%
Seasonal Cycle
U.S. Retail Sales Monthly
$430
Billions of Dollars
$410
$390
$370
$350
$330
$310
$290
$270
$250
Jun.
2004
Jul.
Aug. Sep.
Oct.
Nov.
Dec.
Jan. Feb.
2005
Mar.
Apri.
May
Jun.
Jul.
Aug.
Sep.
Oct.
Nov.
Dec.
Jan.
2006
Feb.
Mar.
Apri.
May
Jun.
Month
Changes in Monthly Sales
20.00%
15.00%
$40
10.00%
$20
5.00%
$0
-$20
Jun.
2004
Jul.
Aug. Sep.
Oct.
Nov. Dec.
Jan. Feb.
2005
Mar.
Apri. May
Jun.
Jul.
Aug. Sep.
Oct.
Nov.
Dec. Jan. Feb.
2006
Mar. Apri.
May
Jun.
0.00%
-5.00%
-$40
-10.00%
-$60
-15.00%
-$80
-20.00%
-$100
-25.00%
Month
$
%
Changes in %
Changes in Billions of $
$60
Company Size by Revenues
7%
8%
48%
Other
Walmart
Target
Costco
37%
Retail Metrics
 Revenues,
net income and profit
margins
 Number of stores
 Same store sales
 Sales per square foot
 Target market
Driving Force Overview
 Low
priced goods
 Location
 Product line
 Market cycle (economy),
Employment
 Consumer confidence level
 Natural disaster
Low-priced Goods
 Efficient
distribution network
 Constant search for low-cost goods
– Import goods from countries with low
cost labour
 Large
volume discount
 Strategically located stores
 Flexible workforce
– Part-time
– Non-unionized vs. unionized
Location
 Store
density
 Urban vs. Suburban
 Land value of location
Product Line
 Price
vs. quality
– High-end: Urban Fare, Nordstroms
– Mixed: the Bay, Target
– Low-end: Wal-Mart
 Variety
of goods sold
– Primarily grocery store (Top Food,
Safeway)
– Primarily hard products (Best Buy,
Home Depot)
– Primarily soft products (the Bay, the
Brick)
US Economy
 Indicator
slowing economy
– Cooling housing market slowing
economy (housing starts)
– High energy price
– Stabilized interest rates
– Household income
Housing Starts
Housing Starts (in
thousands of units)
Monthly Housing Starts in 2006
2,500
2,265
2,000
1,500
2,132
1,972
1,832
1,953 1,833
1,760 1,674 1,772
1,486
1,000
500
0
Jan.
Feb. Mar. Apri. May Jun.
Jul.
Month for Year 2006
Aug. Sep. Oct.
Increasing Oil Price
Oil Price (in dollars per
barrel)
Monthly Spot Oil Price for 2006
$72.00
$70.00
$68.00
$66.00
$64.00
$62.00
$60.00
$58.00
$56.00
$69.69
$70.94 $70.96
$65.51
$62.90
$61.63
Jan.
Feb.
Mar.
Apri.
Month
May
Jun.
Interest Rates
Interest Rate (%)
Monthly Prime Interest Rates for 2006
8.4
8.2
8
7.8
7.6
7.4
7.2
7
6.8
6.6
8.25
7.93
8.25
8.25 8.25
8.02
7.75
7.5
7.53
7.26
Jan.
Feb.
Mar.
Apri.
May
Jun.
Month
Jul.
Aug.
Sep.
Oct.
Industry Returns and Interest Rate

1 yr gain after the Fed stop raising rates
Financials
24.7%
Health Care
23.4%
Consumer staples 17.6%
S&P 500
9.9%
Source: Citigroup
NOTE: Based on average change in the 12
months after final rate increase, 19832000
20
01
20 .1
01
20 .2
01
20 .3
01
20 .4
02
20 .1
02
20 .2
02
20 .3
02
20 .4
03
20 .1
03
20 .2
03
20 .3
03
20 .4
04
20 .1
04
20 .2
04
20 .3
04
20 .4
05
20 .1
05
20 .2
05
20 .3
05
.4
Personal Income
5 Year Trend
Date(Quarterly)
Unemployment Rate
Annual Arithmatic Average for Unemployment Rate
7.00
Unemployment Rate (%)
6.00
5.78
5.00
4.00
6.00
5.52
5.06
4.74
3.97
3.00
2.00
1.00
0.00
2000
2001
2002
2003
Year
2004
2005
Consumer Expenditure
Average Annual Consumer Expenditure
$47,000
$46,409
Consumer Expenditure
$45,000
$43,395
$43,000
$41,000
$40,817
$40,677
$39,518
$39,000
$38,045
$37,000
$35,000
2000
2001
2002
2003
2004
2005
Ye a r
$3,500
8.00%
$3,000
7.00%
6.00%
$2,500
5.00%
$2,000
4.00%
$1,500
3.00%
$1,000
2.00%
$500
1.00%
$0
0.00%
2000-2001
2001-2002
2002-2003
Ye a r
$
%
2003-2004
2004-2005
% Change in Annual
Expenditure
$ Change in Annual
Expenditure
Changes in Consumer Expenditure
Composition of Consumer
Expenditure
Composition of Consumer Expenditure for 2005
Others, 10%
Food, 13%
Insurance, 11%
Entertainment, 5%
Housing, 33%
Heathcare, 6%
Transportation, 18%
Apparel , 4%
Consumer Confidence Index:
5 Year Trend
Date
Sep.(p)
Apr.
Nov.
June
Jan.
Aug.
Mar.
Oct.
May
Dec.
July
Feb.
Sept.
Apr.
Nov.
June
Jan.
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
Natural Disaster
 Hurricanes
– Ex. 2005 August Hurricane Katrina
 Earthquake
 Rain
– Ex. Rains increase the amount of
turbidity level of tap water
Target®
Expect More. Pay Less. ®
Company Overview
• Listed on New York Stock Exchange
• Part of the S&P 100, 500, and 1500 Super
Comp. Russell 1000.
• Market Cap: 50.01B
• Stock Price 52 week range for 2006: 44.7060.34
• Shares Outstanding: 874,040,000
• Dividend Yield: 0.48 (0.80%)
• Price Earning Ratios: 19.51
• EPS: 2.98
Date
10/2/2005
7/2/2005
4/2/2005
1/2/2005
10/2/2004
7/2/2004
4/2/2004
1/2/2004
10/2/2003
7/2/2003
4/2/2003
1/2/2003
10/2/2002
7/2/2002
4/2/2002
1/2/2002
10/2/2001
7/2/2001
4/2/2001
1/2/2001
Price
Stock Price History
5 Year Trend
65
60
55
50
45
40
35
30
25
20
11/3/2006
10/3/2006
9/3/2006
8/3/2006
7/3/2006
6/3/2006
5/3/2006
4/3/2006
3/3/2006
2/3/2006
1/3/2006
Stock Price in 06
Price
65
60
55
50
45
40
Company M & A’s
• From 1960-80’s
– Lechmere, J.L. Hudson Company, Mervyn’s,
Ayr-Way, Fed Mart, Gemco,
• From 1990-00’s
– Marshall Field’s, Fedco,
• Most recently:
– June 9, 2004
• Announced sale of Marshall Field’s Chain, and
several Mervyn’s stores
Company Profile
• Large-format general merchandise discount
stores in the United States
– Target & SuperTarget stores.
• Assortment of general merchandise and limited
assortment of food items.
– Target-general merchandise
– SuperTarget-a line of food items along with general
merchandise.
• The credit card operation represents an integral
component of its core retail business.
• The company also operates Target.com, an
online business.
Company Profile
• The company now has more than 1,440 stores
in 47 states, and employs more than 300,000
employees.
• Year ending 2005, Target reaches an important
milestone; 50 billion dollars in sales in a single
year.
• Target’s Customers
–
–
–
–
Median age of 41
Median household income of approx. $58k
Approx. 43% have children at home
About 43% have completed college
Management
• Robert J. Ulrich
– University of Minnesota, BA, 1967
– Chairman and C.E.O for 12 years
– With the company for 35 years
– Held various positions
– Annual compensation $10.1 million
• Gregg W. Steinhafel
– President for 7 years
– Annual compensation $2.7 million
Key Figures
•
•
•
•
•
Same-Store Sales Growth (“Comps”)
Sales per Square Foot
Inventory Turnover
Gross Profit Margin
Debt/Equity Ratio
Same-Store Sales Growth
Percent
5 Year Trend
6
5
4
3
2
1
0
5.3
5.6
2004
2005
4.4
4.1
2.2
2001
2002
2003
Date
Sales per Square Foot
5 Year Trend
330
319
320
307
310
300
290
280
282
278
274
270
260
250
2001
2002
2003
Date
2004
2005
Inventory Turnover
5 Year Trend
12.00
9.77
10.00
8.83
8.41
8.00
7.77
7.4
8.77
7.3
7.1
7.2
6.5
Target
6.00
Industry
4.00
2.00
0.00
2001
2002
2003
Date
2004
2005
Gross Profit Margin
5 Year Trend
Percent
33
31.9
32
31
30
29
31.2
30.2
30.6
29.4
28
2001
2002
2003
Date
2004
2005
Debt/Equity Ratio
5 Year Trend
1.4
1.2
1.14
1.18
1
1
0.8
0.63
0.63
0.6
0.73
0.57
0.55
0.69
0.59
Industry
0.4
0.2
0
2001
2002
2003
Date
2004
Target
2005
Driving Factors of Staple Industry
• Low COGS achieved through distribution
and supply chain
• Image
• Location
• Product line
Low COGS achieved through
distribution and supply chain
• Significant investments in supply chain and in
leading-edge technologies.
• Current distribution network includes 23 regional
distribution centers and 3 import warehouses.
– Plans to add 2 distribution centers and 3 import
warehouses in the next 2 years
• Derive operating efficiencies through
6Sigma@Target and outsourcing a variety of
business functions.
Image
•
Target’s store are:
– Inviting and easy-to-shop,
– Clean, bright, safe and accessible, and
– Elaborately designed to excite their guests
•
Corporate Responsibility
Location
• Currently not pursuing international
expansion, still considers potential
continued growth in the U.S.
• By 2010, plans to reach approx. 2000
stores.
• Concentrate store growth in major
metropolitan areas.
Product line
• Assortment of general
merchandise
• Exclusive brands that make
Target a destination for highquality
• Offers pharmaceutical products
Firm Strategy
• Store Growth Nationally; complemented
by innovative design and support
• Increase the mix of competitively priced
consumables and commodities
• Expand food offerings in general
merchandise stores
• Innovation is key to expansion and growth
Store Growth Pattern
• In 2006, as of Oct 28
they built 75 more
Target General
Merchandise stores,
and 19 more
SuperTarget stores,
totaling 1494 stores.
Recent Selling of Shares
From Within
In 2006:
• Oct 9th Gregg W. Steinhafel (President)
sells shares totaling $6.2 million.
• Oct 17 & 18th Robert Ulrich Jr. (C.E.O)
sells approx 700,000 shares totaling
$32.1 million.
• Nov 15th Douglas A. Scovanner
(Executive Vice President & C.F.O.)
sells shares totaling $2.7 million.
Recent Selling of Shares from
Outsiders
• Buffett’s Berkshire
Hathaway Inc. owns
745,700 shares of Target,
compared with 5.5 million
shares in June.
Recommendation
BUILDING SMILES
WAL-MART
OVERVIEW








Listed on the NYSE
Part of the Dow Jones Indust.
Ticker: WMT
Market Cap: $200 Billion
Stock Price: $47.50
Dividend yield: 1.4%
Shares Outstanding: 4.17 Billion
P/E ratio: 18.17
5 Yr. Wal-Mart Price
WAL-MART vs. S&P
Number of Shares
Shares Outstanding
4,500
4,450
4,400
4,350
Number in 4,300
4,250
Millions
4,200
4,150
4,100
4,050
4,000
2001
2002
2003
2004
Years
2005
2006
Company Overview

Largest Company in the world

Employs over 1.8 million associate

Sales of $312 billion in 2005
176 Million Shoppers visit Wal-Mart
Every week

WAL-MART
History
Founded in 1962 in Arkansas by Sam
Walton
 Wal-Mart went public in 1970



By the end of the 1980’s WAL-MART had
over 2,200 locations.
Today WAL-MART has over 6100 stores
– 3856 In the USA
– 2290 International stores
Lee Scott
 Became CEO in 2000





Has been with Wal-Mart since
1978
Serves on the board of directors
Compensation $5 million in cash
and $5 million in stock options
Degree in Business from Pittsburg
university
Share value has dropped 22%
since he has been running the
company
Chairman of the board





Robert Walton Chairman of the
board
Son of the founder
Only Walton family member still on
the board of directors
Owns over 2 million shares in the
company
Walton Family still has large stake in
the company
WAL-MARTS
STRATEGY

Improve company image
– Improve relationship with associates
and surrounding communities
– Become a leading company in
sustainability
– Provide a diverse variety of products at
a great price
Improving Company Image




Pays below average wages but creates over
250,000 new jobs a year
Low cost health care coverage of $3 per month
Created an employment advisory council to
improve standards for minority groups
Created job & opportunity zones where the
company provides local business with additional
training
WAL-MART
staying ahead of the curve



To Be Supplied 100% By Renewable
Energy
To Create Zero Waste
To Sell Products That Sustain Our
Resources & Environment
Product Line
 Mainly
a general merchandise chain
– Including electronics, clothing, auto parts,
food, gift cards, financial services,
pharmaceutical products
 Moving
into food products within
North America
– Through SuperCenters and Neighborhood
Markets
WAL-MART’S
growth Strategy

Continue to diversify the product
line offered at domestic locations
Wal-Mart’s Divisions
 Discount
centers
– Sales general merchandise and food
products
 Sam’s
Club
– A business to business operation
 International
operations
– Focuses is on South America and Asia
WAL-MART
Domestic Market

Four Major Store types
1. Discount stores -1,209
–
Sq. ft. 102,000
2. Supercenters – 1980
–
Sq. ft. 187,000
3. Sam’s Club – 567
–
4.
Sq. ft. 129,000
Neighborhood Markets – 100
sq. ft. 42,000
SALES BREAKDOWN
2006
Net Sales
2005
2004
Percen
t of
total
Percent
Increase
Net Sales
Percent
of total
Percent
Increase
Net Sales
$174,220
68%
Percent
of total
Wal-Mart
Stores
$ 209,910
67%
9%
$191,826
67%
10%
Sam's Club
39,798
13%
7%
37,119
13%
8%
34,537
14%
International
62,719
20%
11%
56,277
20%
18%
47,572
19%
Total
$ 312,427
100%
10%
$285,222
100%
11%
$256,329
100%
Wal-Mart’s sales
Net sales Increase
25.00
% Increase
20.00
15.00
10.00
5.00
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Year
% Increase
Same Store Sales
10
9
8
7
6
5
4
3
2
1
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Year
Sales Per Square Feet
500
$ per sq. ft.
400
300
273
288
293
318
341
369
388
405
423
433
415
200
100
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Year
Key Ratio
Inventory Turnover
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
9.6
9.2
9.0
7.4
7.3
9.7
9.6
7.1
7.2
7.3
WAL-MART
Industry
2002
2003
2004
2005
2006
Key Ratios
Debt to Equity Ratio
70%
60%
50%
40%
WALMART
30%
Industry
20%
10%
0%
2001
2002
2003
2004
2005
2006
Key Ratios
P/E Ratio
40.00
35.00
30.00
25.00
20.00
P/E WALMART
15.00
P/E Industry
10.00
5.00
2001
2002
2003
2004
2005
2006
WAL-MART
2007 Expansion Plan
Neighborhood
stores
2%
International
expansion
50%
Conversions
35%
Discount stores
5%
Sam's Club
8%
WAL-MART
International expansion
Has had trouble
–
–
In the process of selling off store in
Germany
Selling operations in Korea
WAL-MART
International expansion 2006
Has been very aggressive in South
America & Asia

–
–
–
In 2004 Acquired Supermercados in Brazil adding another
118 stores
Bought a controlling share of Sonae in Brazil adding another
139 locations
Seiyu in Japan added 398 new locations
New International Locations
Sq. Ft.
Brazil
Japan
other
WAL-MART
Domestic Locations
Traditionally located in small towns and in
suburban areas
 Now trying to move into more urban areas
and creating larger stores with a greater
selection of products
 Experimenting with food only locations

WAL-MART
Supply Chain

Over 60,000 suppliers

Shares vital information with suppliers


Owns the worlds largest privately held satellite
system used to track inventory and store sales
Most advanced distribution centers
WAL-MART
Supply Chain Highlights

One of America’s Largest truck Fleet
Suggestion
Hold for long-term slow growth
Reasons: Solid fundamentals
Understands what needs to
be changed
Planning for the future by
becoming more sustainable
Company Overview
 Listed
on Nasdaq
 Part of the S&P
500, Russell 1000
 Ticker Symbol:
COST
 Industry: Discount
Variety Store
Company Overview
Stock Price: $53.40
 Day High: $53.62
 Day Low: $52.88
 52 Week High: $57.94
 52 Week Low: $46


*as of November 17th, 2006
EPS: 2.30
 P/E: 23.25
 Market Cap: 24.99B
 Dividend Yield: 1%
 Shares Outstanding:
467.97M

Stock Price History
Costco Stock Price vs S&P 500
Company Overview
 No.
28 in Fortune 500
 4th largest retailer in USA
 7th largest in the world
 82 fewer stores than Sam’s Club but
generate $20 B more in sales
Company History
 1948:
Sol Price opened Fed Mart
 1976: Opened first store as Price Club in
San Diego
 1983: Founders James Sinegal and
Jeffrey Brotman opened first
warehouse in Seattle
 1993: Costco and Price Club merged to
PriceCostco
 1994: Founders of Price Club left Costco
 1997: Company name was changed to
Costco Wholesaler
James Sinegal, CEO & co-founder





CEO from start of the
company
Earned $583,000 in
salary and bonuses
Business Administration
graduate of San Diego
State University
Leads low-cost lifestyle
Named one of 100 most
influential people in Time
Magazine
James Sinegal Salary Composition
28
200
Salary
Bonus
Stock Gain
350
Retailing Median
333
1045
Salary
Bonus
Stock Gain
1335
Jeffrey Brotman
co-founder & chairman



Undergraduate degree
in Political Science and
law degree from
University of
Washington
3rd generation of
family participating in
wholesaling and retail
merchandising
Former director of
Starbucks and Sweet
Factory
Costco Today
 Aug
2006: 451 locations in North
America
 Several locations in South Korea,
Japan, Taiwan, UK
 Employs approximately 118,000 fulltime and part-time staff
Net Sales by Category
Sales Breakdown by Category
100%
80%
10
14
16
11
13
16
12
12
16
•Other
30
29
29
•Softlines
60%
40%
20%
•Hardlines
30
31
31
•Sundries
•Food
0%
2003
2004
Date
2005
Average P/E Ratio
5 Year Trend
40
35
30
25
20
15
10
5
0
34.9
29.5
25 24.2
23.8
21.6
23.1
20.9
20.8
17.8
Costco
Industry
2001
2002
2003
Date
2004
2005
Sales per square foot (Annual)
Company
Target
$307
Nordstrom
$369
Home Depot
$377
Wal-Mart*
$438
BJ's
$445
Sam's Club*
$552
Costco
$918
Best Buy
$941
Comparable Sales Growth
12%
11%
10%
9%
8%
6%
10%
10%
8%
6%
5%
4%
4%
7%
5%
2%
0%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Year
Warehouses in Operation
450
400
350
300
250
200
150
100
50
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Year
Inventory Turnover
5 Year Trend
14.00
12.47
12.00
10.00
8.00
6.5
11.50
7.4
11.40
7.3
11.90
7.1
12
7.2
6.00
Costco
Industry
4.00
2.00
0.00
2001
2002
2003
Date
2004
2005
Dividend Yield Per Share
5 Year Trend
$0.60
$0.50
$0.39
$0.40
$0.29
$0.25
$0.24
$0.30
$0.49
$0.43
Costco
$0.20
Industry
$0.20
$0.10
$-
$-
$-
$2001
2002
2003
Date
2004
2005
Debt to Equity Ratio
5 Year Trend
0.70
0.63
0.63
0.57
0.60
0.55
0.59
0.50
0.40
0.30
Costco
0.22
0.23
0.20
0.20
Industry
0.17
0.09
0.10
0.00
2001
2002
2003
Date
2004
2005
Gross Profit Margin
5 Year Trend
30
25
23.6
23.9
24.8
24.6
24.6
20
15
12.1
12.3
12.5
12.5
12.4
Industry
10
5
0
2001
Costco
2002
2003
Date
2004
2005
Driving factors
1) Low cost of goods
achieved through
distribution and
supply chain
2) Image
3) Location
4) Product line
Low cost of goods achieved through
distribution and supply chain
 Volume
purchasing
 Purchasing directly from
manufacturers
 Pre-paying vendors to receive
payment discounts
 Minimizing stocking fees
Location
No elaborate
facilities and rent is
lower since it is not
in a prime location
 No lights on most
days to save
electricity.

Image
 Known
as the big box retailer that
treats employees well
 Return policy
– No deadlines
Product line
 Limiting
products to fast selling
models, sizes and colours
– Carry only 4000 items
 Rapid
inventory turnover
 No-name products can be marked by
more than 14%; private items 15%
Employment

Average pay is $17
per hour
– 42% higher than
rivals
– 3rd lowest turnover
rate in retail
industry

92% of health care
costs covered
Low Shrinkage
 (under
0.20% for 2005)
 Entrances and Exits are controlled
 Membership format limits theft
 Good relations among employees
limits internal theft
Cost Minimizing Strategy
 Minimal
advertising expenses
• Reduces costs by 2% per year
• Limited to advertising new warehouse
openings
• direct mail marketing to prospective
new members
• direct marketing programs to existing
members promoting selected
merchandise
Cost Minimizing Strategy
 No
Frills
– No signs saying what's in what aisle.
– No bags.
– No Visas or MasterCards are accepted
(avoiding service charges)
Plans for the Future
 Opening
25-30 more stores across
the USA in fiscal 2006
 Opening 7 more stores in England
and Mexico
 Expanding to several hundred more
Kirkland Signature items in the next
5 years to include diapers,
cosmetics, etc.
 Open Costco Home stores
Current News
 Glass
Ceiling for Women?
– Suit filed in 2004 claims discrimination
against women
– Company discourages women from
applying for mgmt positions and are not
considered for promotion
– Nov 15, 2006: class action suit filed to
represent 700 women.
Recommendation
Hold




large amounts of cash on hand
Paying off a large portion of debt
Dividends being paid out
Shares being repurchased