• BGCR Limited Service Features
Blue Chips

Where Costco Lies Among Its Competitors

The Rising Sales For Costco Are Backed By Competitive Pricing Which Has Led To Ongoing Market Expansion In Store Openings

A Shopper At Costco
Image Source: Bloomberg & GettyImages | A shopper at Costco

Costco Wholesale Corp. a company that sells diverse products which has a steady growth in earnings from sales since 2011. This progress has been as a result of its strategy in controlled pricing and also is a measure in space in store openings. Costco wholesale among its competitors such as Target Corporation and Wal-Mart stores Inc. may not be in the richest in the line of diverse retailing but it sells very well and attracts customers.

One of its competitors is Whole Foods Market Inc. is able to achieve positive sales without having to sacrifice margins. Two major advantages in diverse retailing industry is Customer Consumption and demography. Whole Foods and Costco deal with mostly more affluent customers which boost sales unlike Target and Wal-Mart that have lower income customers.

The rising sales for Costco are backed by competitive pricing which has led to ongoing market expansion in store openings. The growth of Costco has made a lot of earnings over time. The aggressive pricing by Wal-Mart and Target have not led to consistent sales growth despite their profit margins.

Costco finances are very healthy as a result of the operations they have laid down, strong sales and the inventory turnover. The healthy finances shows in areas such as debt use, cash flow and its valuation and its valuation in the stock market.

Costco
Image Source: Bloomberg & GettyImages | Shopping At Costco

Costco Inventory to Sales has been between 0.07 and 0.08; this ratio has stayed in that limit within a five years margin (2011 – 2015). This equals to about 25 – 29 days in stock inventory at a time. When being compared with Target and Wal-Mart, it shows that they have a higher Inventory to ratio at around 0.12 which is about 44 days and 0.09 ( 33days) respectively, as of the same time frame. In comparison of the inventory to ratio, it shows that Costco can make more sales in a given period; also the supply chain management by Costco is likely better. Whole Foods figures were around 0.03 which is around 10 days, which implies that the inventory to ratio is lower than that of Costco.

When looking at the ratio of debt to earnings before taxes, depreciation and amortization (EBITA, Costco has a very low ratio compared to its peers. Costco has a 1.7 while Target and Wal-Mart has 2.3 and 2.1 respectively, also within the time frame of 2011 to 2015. Whole Foods even had a lower ratio of 0.8.

Previous ArticleNext Article
Staff Writer & Business Analyst | An experienced, disciplined, and highly-motivated Business Analyst who has worked on a wide range of projects within the Public and Private Sectors. An accomplished and fluent communicator with strong investigation, problem-solving and decision-making skills, combined with a pragmatic approach and sound business acumen. A highly accomplished individual with a verifiable track record
Share Your Thoughts: