Costco 2006 Annual Report Download - page 24

Changes in prices of merchandise, with the exception of gasoline, did not materially affect the sales
increase. Gasoline sales contributed to the 13.7% increase in net sales by approximately 235 basis
points for fiscal 2006, with approximately 70% of this increase related to the change in price. In
addition, translation of foreign sales into U.S. dollars contributed to the increase in sales due to
stronger foreign currencies, accounting for approximately 87 basis points of the comparable year-over-
year sales increase.
2005 vs. 2004
Net sales increased 10.0% to $51.88 billion in fiscal 2005 from $47.15 billion in fiscal 2004. The
increase was due to comparable warehouse sales growth of 7% and to the opening of 16 new
warehouses (21 opened, 5 closed due to relocations) during fiscal 2005. Net sales were reduced by
the implementation of Emerging Issues Task Force (EITF) Issue No. 03-10, “Application of Issue
No. 02-16, “Accounting by a Customer (Including a Reseller) for Certain Consideration Received from
a Vendor,” by Resellers to Sales Incentives Offered to Consumers by Manufacturers,” (EITF 03-10)
which was effective at the beginning of our fiscal 2004 third quarter. EITF 03-10, which primarily
impacts our vendor coupon programs, reduces net sales and merchandise costs by an equal amount
and does not affect our consolidated gross margin or net income. Had EITF 03-10 been in effect for the
comparable periods in fiscal 2004, the net sales increase in fiscal 2005 would have been 10.5% and
the comparable sales increase for fiscal 2005 would have been 8%.
Changes in prices of merchandise, with the exception of gasoline, did not materially affect the sales
increase. Gasoline sales contributed to the 10.0% increase in net sales by approximately 155 basis
points for fiscal 2005, with approximately 62% of this increase related to the change in price. In
addition, translation of foreign sales into U.S. dollars contributed to the increase in sales due to
stronger foreign currencies, accounting for approximately 134 basis points of the comparable year-
over-year sales increase.
Membership Fees
Fiscal 2006 Fiscal 2005 Fiscal 2004
Membership fees ........................ $1,188,047 $1,073,156 $961,280
Membership fees increase ................ 10.7% 11.6% 12.7%
Membership fees as a percent of net sales . . 2.02% 2.07% 2.04%
Total cardholders ....................... 47,679 45,258 42,416
2006 vs. 2005
Membership fees increased 10.7% to $1.19 billion, or 2.02% of net sales, in fiscal 2006 from $1.07 billion,
or 2.07% of net sales, in fiscal 2005. This increase was primarily due to additional membership sign-ups
at the 25 new warehouses opened in fiscal 2006, increased penetration of the Executive Membership
program, and high overall member renewal rates consistent with recent years, currently 86.5%.
In April 2006, we announced plans to increase annual membership fees by $5 for our U.S. and Canada
Gold Star (individual), Business, and Business Add-on Members, effective May 1, 2006 for new
members and July 1, 2006 for renewals. Approximately 15 million members will be affected by this
increase. Membership fees are accounted for on a deferred basis, whereby membership fee revenue is
recognized ratably over the one-year term of the membership, which will have the effect of spreading
the full realization of the increase over the next two fiscal years.
2005 vs. 2004
Membership fees increased 11.6% to $1.07 billion, or 2.07% of net sales, in fiscal 2005 from $961
million, or 2.04% of net sales, in fiscal 2004. This increase was primarily due to additional membership
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