Costco Wholesale : FY 2020 Annual Report 2.6 MB

2020

ANNUAL REPORT

FISCAL YEAR ENDED AUGUST 30, 2020

December 10, 2020

Dear Costco Shareholders:

When we started fiscal 2020, we expected to proceed with business as usual, focusing on providing Costco members with quality merchandise and exceptional value. Little did we know what lay ahead.

As the coronavirus pandemic swept the globe and crippled much of the world's economy, Costco was designated as an essential business, a responsibility we took seriously. In a time of uncertainty and panic purchasing by members, we went "all out" to try to maintain adequate supplies of necessities, including food, cleaning products, and personal care items. We targeted our efforts on these in-demand goods, installed protective barriers at the registers, increased our sanitation at high-touch areas, established social distancing protocols and face covering policies, created special operating hours for high-risk individuals and first responders, and donated surgical masks to healthcare workers. Certain of our ancillary businesses were temporarily closed, and our food courts continue to face significant restrictions. In addition, Costco Travel endured a tumultuous time, as tens of thousands of members canceled bookings and requested refunds. To reward our employees for exemplary service in difficult times, we temporarily increased compensation levels and otherwise increased spending for wages and benefits, including overtime pay.

Net sales for fiscal 2020 totaled $163 billion, an increase of 9%, with a comparable sales increase of 8%. Net income was $4 billion, or $9.02 per diluted share, an increase of 9%. In addition, the Company surpassed 100 million members worldwide, contributing to membership revenue of $3.54 billion.

Costco.com played a vital role in meeting members' needs, especially those choosing or required to stay at home. Our ecommerce business saw a 50% increase in sales. Increases were particularly evident in same day and 2-day grocery deliveries, prescription medications, electronics, and office supplies. Additional strong sales were seen in apparel, appliances, health and beauty products, and home furnishings. Our depots responded to unprecedented volume by shifting certain operations to 24 hours a day, seven days a week. As circumstances allowed, expansion in fiscal 2020 continued, with the opening of 13 new warehouses. In fiscal 2021, we expect to open 20 new buildings.

While international trade issues and tariffs threatened increased prices on some goods, we worked diligently on both short- and long-term mitigation strategies. Buyers worked with suppliers to share in the absorption of tariffs, create new efficiencies in logistics and transportation, and move production origin. Buyers were committed to keeping us in stock, despite reduced workforces, factory closures, government restrictions and financial hardships.

The Kirkland Signature™ brand saw another solid year, with global sales exceeding $52 billion. This growth of 7% was a result of several factors, including an emphasis on core items in categories such as grocery, health and beauty, home cleaning, and paper goods. Continuous improvements were a focus for key items, such as diapers, bar soap and frozen foods. We introduced new products in expanded categories, including the first Kirkland Signature putter, motor oil, copper exposed cookware, and apparel items. Our chicken complex in Nebraska became fully operational in fiscal 2020.

Costco also made two important investments this year, the acquisition of Innovel (now known as Costco Wholesale Logistics or CWL) and a minority interest in Navitus. CWL is a logistics supplier, with infrastructure for efficient delivery and installation of big and bulky items, such as appliances, furniture, and exercise equipment. Navitus, a pharmacy benefit manager, will help us lower the health care spend for patients at our pharmacies, optical and hearing aid departments. Both acquisitions align with our philosophy of reducing costs and passing on the savings to our members.

We continue to address sustainability in our supply chains. We support good land stewardship practices that include: avoiding deforestation and conversion of natural ecosystems; sourcing products from responsibly managed and certified forests; and focusing on preserving native grasslands. Through these efforts and others, we seek to protect valuable natural resources and reduce our environmental impact. Our Sustainability Commitment was updated in December 2020 to outline our progress this year and includes our new Climate Action Plan and Forest Conservation Commitment. In fiscal 2020, Costco donated an estimated 65 million pounds of food to those in need.

As we near the end of this extraordinary year, I extend my deepest gratitude to Costco employees, especially those on the front lines of our warehouses, whose exemplary service to members, dedication to the company, and support of one another has truly demonstrated excellence. Finally, I thank Costco members around the world for their loyal support and trust in our business. Together, we've made it through this trying year, and I am confident we will tackle whatever is ahead with strength and optimism.

From the Costco family to yours, I wish you a happy, prosperous and healthy New Year.

Sincerely,

Craig Jelinek

President and Chief Executive Officer

UNITED

STATES

COSTCO.COM

ALABAMA - 4

ALASKA - 4

ARIZONA - 18 CALIFORNIA - 131 COLORADO - 14

CONNECTICUT - 7 DELAWARE - 1 FLORIDA - 28 GEORGIA - 13 HAWAII - 7 IDAHO - 7 ILLINOIS - 22 INDIANA - 7 IOWA - 3 KANSAS - 3 KENTUCKY - 4

LOUISIANA - 3

MARYLAND - 11

MASSACHUSETTS - 6

MICHIGAN- 16

MINNESOTA - 12

MISSOURI - 6

MISSISSIPPI - 1

MONTANA - 5

NEBRASKA - 3

NEVADA - 8

NEW HAMPSHIRE - 1 NEW JERSEY - 21

NEW MEXICO - 3

NEW YORK - 19

NORTH CAROLINA - 9 NORTH DAKOTA - 2 OHIO - 12 OKLAHOMA - 2 OREGON - 13 PENNSYLVANIA - 11

SOUTH CAROLINA - 6 SOUTH DAKOTA - 1 TENNESSEE - 5 TEXAS - 33

UTAH - 12

VERMONT - 1

Canada

102

United States and

Puerto Rico 558

Mexico

39

VIRGINIA - 17

WASHINGTON - 32

WISCONSIN - 9

WASHINGTON, D.C. - 1

PUERTO RICO - 4

CANADA	MEXICO
COSTCO.CA	OSTCO.COM.MX	MORELOS - 1
ALBERTA - 18	AGUASCALIENTES- 1	NUEVO LEÓN - 3
BRITISH COLUMBIA - 14	BAJA CALIFOORNIA - 4	PUEBLA - 1
MANITOBA - 3	BAJA CALIFORNIA SUR - 1	QUERÉTARO - 1
NEW BRUNSWICK - 3	CHIHUAHUA - 2	QUINTANA ROO - 1
NEWFOUNDLAND AND	CIUDADDE MÉXICO - 4	SAN LUIS POTOSÍ - 1
LABRADOR - 1	COAAHUILA - 1	SINALOA - 1
NOVA SCOTIA - 2	GUANAJUATO- 3	SONORA - 1
ONTARIO - 36	JAALISCO - 3	TABASCO - 1
QUÉBEC - 22	ÉXICO - 5	VERACRUZ - 2
SASKATCHEWAN - 3	MICHOACÁN- 1	YUCATÁN - 1