Costco (NASDAQ: COST) continues to be the cream of big box retailers. May sales were up 7% to $7.67 billion. Same store sales were up 6%. Costco is not as large as either Wal-Mart (NYSE: WMT) or Target (NYSE: TGT). It has 602 warehouses, with 435 in the United States and Puerto Rico. Still, its sales improvement is uncanny, whether compared to other big box operations or department stores like Macy’s (NYSE: M) or J.C. Penney (NYSE: JCP).
Usually, there are two explanations for Costco’s success. The first is its “membership”model. Customers pay a fee for access to its discounted merchandise. In theory, once the membership is paid, people do not want to “waste” that money by shopping somewhere else. The other possibility is that the bulk of most Costco merchandise is so great that customers believe that the discounts are deeper than at other retailers, and that the size of cereal containers which are as large as cars will cut down the number of store visits.
Douglas A. McIntyre
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