If you want to say which industry is a big white horse, you have to say that it is the big consumption field. The first thing that comes to mind must be the national brand-national liquor Maotai, which has risen more than 14 times in the past 10 years.

Americans are not in the habit of drinking spirits, but there is also an industry in which American stocks often produce Daniel stocks-that is, the retail sector of supermarkets.

Trend of Walmart Inc, Costco Wholesale Corp and Kroger in 1986-2018

Walmart Inc, Costco Wholesale Corp and Kroger are the top three supermarket chains in the United States by income, which were founded in 1962, 1983 and 1883 respectively.

Looking back on their trends over the past 30 years, they have all performed well, far exceeding the market cycle. In the picture above, Walmart Inc has risen nearly 57 times, Kroger nearly 39 times, Costco Wholesale Corp has risen about 123times, the Nasdaq has risen nearly 20 times, and the S & P 500 has risen about 11 times over the same period.

What we are going to talk about today is Costco Wholesale Corp, this super invincible stock.

What is the charm of Costco Wholesale Corp, who both Lei Jun and Munger praise angrily?

Costco Wholesale Corp is a member-made warehouse-type low-price retail supermarket. Many Chinese may not be familiar with Costco Wholesale Corp because the first store in the mainland will not start operation until next year, which is located in Shanghai. But if you follow Lei Jun, you should know that he once praised the supermarket. In addition, this is also a favorite company of Warren Buffett's golden partner Munger.

Its English name is Costco Wholesales, which is really fastidious. Cost means "cost". In English, co is a suffix, meaning "together, common" and wholesale, that is, "wholesale".

This is a supermarket that can't enter without a membership card, but as soon as you enter it, you have the illusion that you are in an or warehouse in a hypermarket. Costco Wholesale Corp's operation model is very simple, it directly wholesale a large number of goods from suppliers, eliminating the middleman to earn the price difference, store furnishings like a warehouse, can store a lot of goods, which is in line with its large-scale sales strategy. All of these are to get the goods at the lowest price and sell them to customers at the most affordable price & specifications.

The picture of the scene is as follows, simple and neat. Similar to the pick-up area of IKEA.

My 'secret' is so simple that I'm reluctant to speak openly about it for fear of appearing stupid. I sell things as cheaply as I can.

-Sol Price, the originator of the warehouse supermarket model.

Low prices, as low as possible commodity prices, is the secret of the warehousing supermarket industry, but also one of the principles that Costco Wholesale Corp has been implementing. With the membership card as the threshold, it can be made bigger and bigger, which is naturally inseparable from the attractiveness of low-cost goods.

After visiting Costco Wholesale Corp at that time, Lei Jun was amazed at how cheap it was. With high-quality member users and high turnover, Costco Wholesale Corp has strong bargaining power among suppliers. In addition, Costco Wholesale Corp himself has also launched some high-quality own brands, which have more advantages in cost control.

How cheap is it? His family's iconic American Hot Dog hamburger and soda combination costs only $1.50 and does not change the price all the year round, which has become one of the important features that attract many people to join the club. Now we have to buy 5 yuan for a bottle of soda, which shows how conscientious the price is.

If Costco Wholesale Corp had only made his debut cheaply, he would never have come to where he is today. Of course, it is better than that.

Costco Wholesale Corp is not only cheap, but also the price is very fair, saving the trouble of comparing goods. The quality is also guaranteed because the company is very strict in selecting suppliers. Not to mention private brands, such as Kirkland SignatureAt present, it is the number one healthy brand in the United States. The brand contributed 27% of Prida's revenue in 2017, up from 12% in 1999.

In addition, unlike supermarkets such as Walmart Inc, there are a large number of SKU products, which will pick out the most affordable ones to avoid the pain of consumers' choice. The average SKU of each Costco Wholesale Corp is 3700, and there are only 1-2 choices for each item. Sometimes the more choices you have, the more you compare them with each other, and in the end, you don't even have the desire to shop.Costco Wholesale Corp knows how to do this.. Many special products, such as gluten-free, organic and weight-loss foods, are available here, which can be said to be possible.All in one storeInstead of going to a special store.

Not only that, Costco Wholesale Corp is also constantly improving in the shopping experience. Free samples are available all the year round. From time to time, some creative new products are developed, there is no classification of goods to extend the shopping time, the price is discounted at the end of every 7, and marked with "discount", that is, the goods are on sale. Maximize the shopping experience in a variety of details to meet the "take advantage" mentality of consumers.

There is one of Costco Wholesale Corp's corporate values: the key to long-term success is not high profit margins, but how to deal with the relationship with people, and it is more important to establish and maintain the relationship with our members, employees and suppliers.

Allow members to refund unconditionally, it doesn't matter to open the seal (except electronic products), as long as you are dissatisfied, give you a refund until satisfied! This is the supreme trust of the customer.

In addition, it is very friendly to employees, not only has a reasonable salary adjustment system, but also has a high salary level in the United States. A netizen revealed that he once worked part-time in Costco Wholesale Corp but still enjoyed the benefits of regular employees, or even retirement benefits. Costco Wholesale Corp's reason for doing this is simple: trust and respect employees, while helping to reduce turnover, that is, to reduce personnel selection and training costs.

Now, do you still think Costco Wholesale Corp's is good, just cheap?

The most powerful "weapon" of the second-highest-earning supermarket chain in the United States is membership.

Why can an offline supermarket with a low price as low as possible and only for members become the second largest supermarket chain in the United States? In addition to the volume of low-cost products, the long-term contribution of membership is the most important reason for its success.

Let's take a look at the latest financial report released by Costco Wholesale Corp on December 13. The results released this time are Q1 performance data for fiscal year 2019 as of November 25.

Revenue for the quarter was $34.31 billion, 10% year-on-year, below Bloomberg's expectations of $34.8 billion; net profit was $767 million, up 19.8% year-on-year and $1.73, exceeding Bloomberg expectations of $1.623.

Source: wind

Compared with Walmart Inc's low single-digit income growth and declining net profit growth, Costco Wholesale Corp's two figures perform well, but in view of rising transportation costs, the company's expansion and the strategy of stimulating consumption with persistently low prices, the company's gross profit margin continued to be under pressure, with a gross profit margin of 12.7% for the quarter (Walmart Inc's 25.4%).

However, this does not affect the growth of its net profit, which is inseparable from it.The high profit contributed by Costco Wholesale Corp's membership system. As can be seen from the chart below, although there is a big gap in gross profit margin with Walmart Inc, there is little difference in net profit margin between the two.

Costco Wholesale Corp membership card is for individuals and enterprises, which is divided into ordinary members (US $60 / year) and senior members (US $120 / year).

Cardholders can shop at any store and apply for one for family members free of charge, while premium members can enjoy an additional 2 per cent rebate on shopping (up to a ceiling of $1000) and other additional services. In addition, enterprise card holders can not only enjoy the corresponding benefits, but also enjoy extra people to join the ranks of card holders, resale of goods and other rights.With members enjoying ultra-low-grade goods, real unconditional refunds, rebates and other benefits, the number of Costco Wholesale Corp members is increasing, and the renewal rate is also rising, thus increasing net profit.

As of October 2018, the number of Costco Wholesale Corp members has broken through.9430万，The membership renewal rate is as high as 88%.North America and Canada have been further promoted to90.5%。

From the historical data, it can be seen that membership fees have made an important contribution to the company's operating profit, accounting for 69% of the company's operating profit by 2017. Things are cheap, good quality, good service, membership fees are also relatively reasonable, the possibility of not renewing is too small.

In addition, members can not only contribute high interest rate membership fee income, the most important thing is that its high stickiness is the main thrust of sales income, making the turnover rate extremely high, and the marketing cost is very low.

In addition to these, there are several other important operational data that are also worth watching.

In that quarter, the company's same-store sales, Internet sales and passenger traffic grew steadily compared with the same period last year, and the slowdown in economic growth can maintain growth, reflecting the company's excellent operating ability.

In addition, the pace of expansion, the latest number of stores 768, a net increase of 4, is expected to net increase of 23 new stores in 2019, 3 Universe 4 are in the United States. At present, Costco Wholesale Corp's main market is still in the Americas, of which the United States and Canada account for 83%. Online shopping services have been launched in the United States, Canada, Mexico, the United Kingdom and South Korea.

For Internet business, Costco Wholesale Corp is imperative, and online shopping is open to non-members. But does offline success ensure that it blossoms online? Not necessarily.

Some analysts once said that Costco Wholesale Corp is a company that is not afraid of Amazon.Com Inc (Amazon-proof). CFO Richard Galanti, who is a wise man, said I don't believe our company will always be immune to Amazon.Com Inc's expansion. Online e-commerce will certainly have an impact on traditional retail, and Costco Wholesale Corp will not be spared. But in the future, the company will continue to focus on optimizing the store shopping experience while expanding its online business.

Summary

In the case of same-store sales, new store expansion and stable passenger flow, gross profit margin continues to be under pressure below 13% for two consecutive quarters, superimposed macro pessimistic environment and lower-than-expected revenue in the current quarter. Investors are worried about the future. At one point, Costco Wholesale Corp fell more than 8 per cent on the trading day after the announcement of the results.

In the long run, as long as this strategy and system can be well implemented, Costco Wholesale Corp will still be able to find his own market with a gross profit margin of no more than 14% (this is Costco Wholesale Corp's enterprise rule). After all, retail consumption is rigid demand, and the impact of the slowdown in economic growth is limited. The current 12-month target price given by Bloomberg analysts is as follows:

But at present, from the perspective of PE (TTM), as of December 13, the share price of Costco Wholesale Corp is about 29 times, Walmart Inc is about 20 times, and Kroger is about 14 times. Costco Wholesale Corp, who has a good sustainability of growth, has obviously gained higher expectations. the question is how to maintain growth?

Generally speaking, the low price + strictly selected goods and the unique membership system constitute the deepest moat of Costco Wholesale Corp, while the growth rate of same-store sales is higher than that of peers, the increasing number of new stores, and the continuous improvement of membership benefits. these constitute Costco Wholesale Corp's core advantages. In the future, to compete with Amazon.Com Inc, unlock the potential of e-commerce, to further expand the international market, especially the debut of this huge consumer market in China next year, it is worth looking forward to.