3 Hidden Reasons for Costco's Profit Surge
Costco Wholesale (NASDAQ: COST) operates with some of the slimmest margins in retail.
Historically, the company's gross margin is just around 13%, compared to competitors who tend to have gross margins of at least 20%. That's part of Costco's strategy, and the reason it spends almost nothing on decor or marketing, and uses its cost savings and "no-frills" business model to offer customers the lowest possible price. Most of its profits come from membership fees, allowing customers to shop for goods nearly at cost.
That also means it isn't necessarily focused on profit margin, because it wants to ensure that those efficiencies are returned to the customer through lower prices. Nonetheless, Costco's profits surged in its fiscal fourth quarter as reported earnings per share jumped 27% to $3.13 on a 12.5% increase in net sales to $52.3 billion. The warehouse retailer got a number of tailwinds from the pandemic as shoppers continued to flock to its stores, stocking up on goods during a time when people around the world are spending more time at home.
Source Fool.com
