"Not everything that counts can be counted. Not everything that counts counts."
The "retail game" is retailers establishing habits among their patrons. Once a decision is made to use a certain retailer, the consumer is highly unlikely to re-evaluate their decision. This is a subject that has been extensively studied regarding consumer psychology.
Costco came out with earnings yesterday for their third quarter. I viewed it as a very good quarter, but their gross margins have been falling since the COVID crisis began. Costco's GM was almost 13.5% at the beginning of the crisis and is now 11.9% (See attachment. Data from SEC documents.).
At the same time, sales are booming ahead and their net margin (Return on Sales) has been increasing from less than 1.5% in 2009Q3 to 2.57% in this quarter (2022Q3).
What's going on here? It looks to me like they are forgoing even better gross margins by not passing along as much of their product cost increases to their customers. Other firms are sweating the short-term and trying to cram down as much of their product cost increases into their customers' wallets. This long-term focus is benefiting Costco, as more customers, are lining up to shop at Costco.
When was the last time you went to Costco and it was empty? It just gets busier all the time.
Be smart, be well-read, be aware and be successful.
