Financial Benchmarking. What is Costco's financial performance compared to its competitors of Sam's Club and BJ's Wholesale Club? Use three different metrics for comparison. what is the metric that can be used here? and how do i compare them
STAY STRONG HONG KONG 256 Part 2 Cases in Crafting and Executing Strategy EXHIBIT 5 Selected Financial and Operating Data for Sam's Club, Fiscal Years 2001, 2010, 2015-2017 Sam's Club 2017 2016 2015 2010 2001 Net sales in the United States and Puerto Rico, excluding membership fees (millions of $) $57,365 $56,828 $58,020 $47,806 $26,798 Operating income in the United States (millions of $) 1,671 1.820 1,976 1,515 942 Assets in the United States and Puerto Rico (millions of $) 14,125 13.998 13,995 12,073 3.843 Number of U.S. and Puerto Rico locations at year-end 660 655 647 605 475 Average sales per year-end U.S. and Puerto Rican location, excluding membership fees (in millions of $) $ 86.8 $ 89.6 $ 79.0 $ 56.4 Sales growth at existing U.S. and Puerto Rico warehouses open more than 12 months: Including gasoline sales 0.5% (3.2)% 0.0% (1.4)% n.a. Not including gasoline sales 1.8% 1.4% 2.1% 0.7% n.a. Average warehouse size in the United States and Puerto Rico (square feet) 133,900 133,700 134,000 133,000 122, 100 The sales figure includes membership fees and is only for warehouses in the United States and Puerto Rico. For financial reporting purposes, Walmart consolidates the operations of all foreign-based stores into a single "international" segment figure. Thus, separate financial information for only the foreign-based Sam's Club locations in Mexico, China, and Brazil is not separately available. Source: Walmart's 10-K reports and annual reports, fiscal years 2016, 2010, and 2001. composition of sales across major merchandise cat- Membership and Hours of Operation The egories was: annual fee for Sam's Club business members was Fiscal Years Ending $45 for the primary membership card, with a spouse January 31 card available at no additional cost. Business mem- Merchandise Categories 2017 2016 2015 bers could add up to eight business associates for $45 each. Individuals could purchase a "Sam's Sav- Grocery and consumables (dairy, meat, 59% 59% 57% bakery, deli, produce, dry, chilled or ings" membership card for $45. The membership frozen packaged foods, alcoholic and cards for both individuals and businesses had an nonalcoholic beverages, floral, snack "Instant Savings" where limited-time promotional foods, candy, other grocery items, discounts were electronically loaded on a mem- health and beauty aids, paper goods, ber's card and automatically applied at checkout. A laundry and home care, baby care, pet supplies, and other consumable items) Sam's Club Plus premium membership for business Fuel and other categories (gasoline, 20% 20% 23% and individuals cost $100; in addition to eligibility tobacco, tools and power equip- for Instant Savings, Plus members had early shop- ment, and tire and battery centers) ping hour privileges, received discounts on select Technology, office and entertainment 6% 7% 7% prescription drugs, and earned cash-back rewards (electronics, wireless, software, of $10 for every $500 they spent in qualifying pre- video games, movies, books, music, tax purchases. Cash-back rewards could be used for toys, office supplies, office furniture, photo processing, and gift cards) purchases, membership fees, or redeemed for cash. Home and apparel (home improvement, 9% 9% 8% About 600,000 small-business members shopped at outdoor living, grills, gardening, fur- Sam's Club weekly. niture, apparel, jewelry, housewares, Regular hours of operations were Monday toys, seasonal items, mattresses, through Friday from 10:00 a.m. to 8:30 p.m., Satur- and small appliances) day from 9:00 a.m. to 8:30 p.m., and Sunday from Health and wellness (pharmacy, hearing 6% 5% 5% 10:00 a.m. to 6:00 p.m.; Business and Plus cardhold- and optical services, and over-the- counter drugs) ers had the ability to shop before the regular oper- ating hours Monday through Saturday beginning Walmart's Fiscal Year 2016 10-K Report. at 7 a.m. All club members could use a variety ofSTAY STRONG HONG KONG 258 Part 2 Cases in Crafting and Executing Strategy EXHIBIT 6 Selected Financial and Operating Data, BJ's Wholesale Club, Fiscal Years 2007-2011 Selected Income Statement Data Jan. 29 Jan. 30 Jan. 31 Feb. 2 Feb. 3 2007 (in millions, except per share data) 2011 2010 2009 2008 53 weeks) Net sales $10,633 $ 9,954 $9,802 $8,792 $8,280 Membership fees 191 182 178 176 162 Other revenues 53 51 48 54 Total revenues 10,877 10,187 10.027 9.014 8.497 Cost of sales, including buying and occupancy costs 9.697 9.081 9.004 8,091 7,60 Selling, general and administrative expenses 934 875 799 724 740 Operating income 208 224 221 195 144 Net income 95 $ 132 135 $ 123 72 Diluted earnings per share: 1.77 2.42 $ 2.28 $ 1.90 1.08 Balance Sheet and Cash Flow Data (in millions) Cash and cash equivalents 101 $ 59 $ 51 $ 97 $ 56 Current assets 1,292 1.173 1.076 1,145 1.070 Current liabilities 987 1.006 909 946 867 Working capital 305 167 167 199 203 Merchandise inventories 981 930 860 877 851 Total assets 2,322 2,166 2,021 2,047 1,993 Long-term debt Stockholders' equity 1.144 1.033 985 980 1,020 Cash flow from operations 229 298 224 305 173 Capital expenditures 188 176 138 90 191 Selected Operating Data Clubs open at end of year 189 187 180 177 172 Number of members (in thousands) 9.600 9,400 9,000 8,800 8,700 Average sales per club location (in millions) $ 56.3 $ 53.2 $ 54.6 $ 49.7 $ 48.1 Sales growth at existing clubs open more than 12 months 4.4% (1.9)% 9.4% 3.7% 1.2% Source: Company 10-K reports for 2011, 2010, 2008, and 2007. hearing centers (more than 150 locations), food Strategy Features That Differentiated BJ's courts, a check printing service, vacation and travel BJ's had developed a strategy and operating model packages, DirecTV packages, members-only Geico auto insurance deals, garden and storage shed instal- that management believed differentiated the com- pany from Costco and Sam's Club: lations, members-only Verizon deals, patios and sun- rooms, a propane tank filling service, an automobile Offering a wide range of choice-7,000 items versus buying program, a car rental service, tire services. 3,700 to 4,000 items at Costco and Sam's Club. and electronics and jewelry protection plans. Most Focusing on the individual consumer via of these services were provided by outside operators merchandising strategies that emphasized a in space leased from BJ's. In early 2007, BJ's aban- customer-friendly shopping experience. doned prescription filling and closed all of its 46 in- Clustering club locations to achieve the ben- club pharmacies. efit of name recognition and maximize theSTAY STRONG HONG KONG & 240 Part 2 Cases in Crafting and Executing Strategy When he stepped down as CEO, Sinegal retained his membership fees generated over $2.6 billion in rev- position on the company's Board of Directors and. enues for the company. Annual sales per store aver- at the age of 79, was re-elected to another three-year aged about $162 million ($3.1 million per week) in term on Costco's board in December 2015. 2016, some 86 percent higher than the $86.9 mil- Costco Wholesale in 2016 lion per year and $1.7 million per week averages for Sam's Club, Costco's chief competitor. In 2014, 165 In June 2017, Costco was operating 732 membership of Costco's warehouses generated sales exceeding warehouses, including 510 in the United States and $200 million annually, up from 56 in 2010; and 60 Puerto Rico, 95 in Canada, 37 in Mexico, 28 in the warehouses had sales exceeding $250 million, include United Kingdom, 25 in Japan, 13 in South Korea, ing two that had more than $400 million in sales." 13 in Taiwan, eight in Australia, two in Spain, and Costco was the only national retailer in the history of one in Iceland. Costco also sold merchandise to the United States that could boast of average annual members at websites in the United States, Canada, revenue in excess of $160 million per location. the United Kingdom, Mexico, South Korea, and Tai- Exhibit 1 contains a financial and operating sum- wan. Almost 89 million cardholders were entitled to mary for Costco for fiscal years 2000, 2005, 2011, shop at Costco as of June 2017; in fiscal year 2016, and from 2013 through 2016. EXHIBIT 1 Selected Financial and Operating Data for Costco Wholesale Corp., Fiscal Years 2000, 2005, 2011, and 2013-2016 ($ in millions, except for per share data) Fiscal Years Ending on Sunday Closest to August 31 Selected Income Statement Data 2016 2015 2014 2013 2011 2005 2000 Net sales $1 16,073 $113,666 $110,212 $102,870 $87,048 $51,862 $3 1.621 Membership fees 2,646 2,53 2,428 2.286 1,867 1,073 544 Total revenue 1 18,719 116, 199 112,640 105, 156 88,915 52,935 32,164 Operating expenses Merchandise costs 102,901 101,065 98,458 91.948 77,739 46,347 28,322 Selling, general, and administrative 12,068 11,445 10,899 10,104 8,682 5,044 2,755 Preopening expenses 78 65 63 51 16 53 42 Provision for impaired assets and store closing costs 16 Operating income 3,672 3,624 3,220 3,053 2,439 1,474 1.037 Other income (expense) Interest expense 133) (124) (113) (99) (116) (34) (39 Interest income and other 80 104 90 97 60 109 54 Income before income taxes 3,619 3,604 3,197 3.051 2,383 1.549 1.052 Provision for income taxes 1,243 1,195 1,109 990 841 486 421 Net income 2.350 $ 2,377 $ 2,058 2,039 $ 1,462 $ 1,063 $ 631 Diluted net income per share 5.33 5.37 4.65 4.63 $ 3.30 2. 18 $ 1.35 Dividends per share (not including spe- cial dividend of $5.00 in 2015 and $7.00 in 2013) $ 1.70 $ 151 $ 1.33 $ 1.17 $ 0.89 $ 0.43 0.00 Millions of shares used in per share calculations 441.3 442.7 442.5 440.5 443.1 492.0 475.7 Balance Sheet Data Cash and cash equivalents $ 3,379 $ 4,801 $ 5,738 $ 4,644 $ 4,009 $ 2,063 $ 525
