Latest / The Curve / RTC37: A deep dive into the fifth biggest retailer in the world: CostCo

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RTC37: A deep dive into the fifth biggest retailer in the world: CostCo · The Curve

0:00
Welcome to the Curve Podcast, a conversation for women who want to learn more about money.
0:07
They are money for the future they want to have.
0:10
We're all busy in the pursuit for financial confidence and increasing your wealth should be a simple one.
0:16
This podcast is for women to learn about investing in a non-scary or intimidating way.
0:21
With short episodes, you'll have time to learn, digest and understand everything to do with the world of investing.
0:28
So thank you for being here and for listening, because together we really can raise the curve.
0:36
Okay, I wish people could see this now.
0:39
No, absolutely not.
0:41
We've turned Victoria Harris's home office.
0:44
That's my full name.
0:46
Is that legal right?
0:47
Into a recording studio.
0:49
Yes.
0:50
You mean to have foam on the walls to try and hush the sound so it doesn't sound eco-e, but instead we've put her entire couch on the floor.
1:00
Try a loud sweet.
1:01
Apologies to my flatmate who's going to get home and be like, hang on a sec.
1:05
Why can't I watch Love Island in my living room?
1:08
Oh.
1:09
Okay, so for anyone who has never listened to a stock story before, the way that this works is basically ween.
1:16
Ween.
1:18
For eggs down a stock, a company, you know, how it works, who manages it, we look at all aspects.
1:24
Not really necessarily just, we sort of decide if it's an investment that we would make or if not.
1:30
Yeah.
1:31
Oh, by hold or sell.
1:32
That's what we called it.
1:33
Yeah.
1:34
Yeah.
1:35
We just keep current hopes of buys, because I don't want to talk about shitty stuff.
1:39
These are really good episodes though, because if you have got a little bit of the knowledge in terms of how to invest.
1:46
You've invested, we've listened to our podcast for season one and season two.
1:49
And you have learnt the basics is to like, how to look at a stock, how to assess what are the five criteria that vixes to look for.
1:56
If you're deciding if it's a winning investment, this is like putting that into practice.
2:01
Yeah.
2:02
And I really enjoy it, because I learn things.
2:04
Yeah, I'm looking at different companies all the time.
2:07
But then this is so much more fun, because it's like, you're looking at interesting companies that have a cool story.
2:12
I don't know.
2:13
It's different rather than like getting into the nitty grittys, spreadsheets, numbers, figures.
2:17
This is more what's the company doing that's different?
2:21
What's its growth strategy?
2:22
Yeah.
2:23
Who runs it?
2:24
All that kind of cool stuff.
2:25
What is the company that we're talking about today?
2:27
Drumroll.
2:28
Do you want me?
2:29
I mean, I'm too scared.
2:30
I mean, I drumroll like the microphone.
2:31
I will fall off the desk.
2:32
I'm sick of an ant.
2:33
An ant.
2:34
An ant coming in.
2:35
It is Costco.
2:37
I don't know what Costco is.
2:40
It was the most unappreciated reaction.
2:43
I'm sorry.
2:44
I don't know.
2:45
It sounds like an American company.
2:47
Yes, it is.
2:48
So this company was founded in 1976.
2:53
It's really old.
2:54
50 years old.
2:55
Nearly 50 years old.
2:56
Yeah.
2:57
So very, very old.
2:58
I started probably before a lot of us were born.
3:02
And it has...
3:03
So it'd be ages with some older listeners.
3:05
True.
3:06
Maybe my dad listens.
3:07
He's a 50.
3:08
Ian.
3:09
Hey, Ian.
3:10
I love how Mike and Ian always get shoutouts.
3:12
Oh, mom's are probably going, hey, what about us?
3:15
I lean and see her are listening too.
3:19
Okay.
3:20
So this company has over 800 stores.
3:23
Wow.
3:24
Yeah.
3:25
So it's a US company, but it has stores in France, Australia, China, even.
3:33
And they've just opened their first one in New Zealand.
3:36
Have they?
3:37
Yeah, a few months ago.
3:38
Where?
3:39
Auckland.
3:40
I do so much research for these stock stories.
3:46
And I'm like, there's not going to be one question that's so...
3:49
That I don't have the answer to.
3:51
And then straight off the bat.
3:52
Oh, where?
3:53
Oh, my gosh.
3:54
Your eyes.
3:55
You honestly look like there was a blank zombie for a second.
3:58
You were just like, come on, you know.
4:00
You know.
4:01
Yeah.
4:02
So it's the fifth largest retailer in the world.
4:06
So behind Walmart, Amazon, for example.
4:09
Wow, it's huge.
4:10
It's huge.
4:11
Yeah, yeah.
4:12
So it's about number 8 or 10 in the index.
4:14
So how are we?
4:15
We have the NZX50, top 50 companies.
4:17
The US has the S&P 500, which is the top 500 companies.
4:21
So this is the, it's in the top 10 companies in that index.
4:25
And it's the fifth largest retailer.
4:27
So it's massive.
4:28
It's huge.
4:29
When you say it's in the top 10, is that constantly?
4:31
Or is it as generally around top 10?
4:33
It changes.
4:34
Yeah, because obviously the share prices change of those companies every day, every minute,
4:38
whatever.
4:39
But then the index gets reweighted, which means if you're not doing well and you drop out,
4:47
you know, you become too small to be at the top 500 companies, then there'll be, and there's another company
4:52
that's not in the index that's growing really fast, then there'll be a reap, what we call a reweight,
4:56
which usually happens quarterly, six monthly, it depends on the index.
5:00
And then that's when there'll be a re shuffle.
5:02
You'll have about two or three that might leave and two or three that will come in.
5:05
But this company's been in the index since 1993.
5:09
And it's consistently number 10, or like in the top 10?
5:13
Yeah.
5:14
Yeah, yeah.
5:15
Yeah.
5:16
So the likelihood of like an Amazon, which is one of the biggest companies in there falling out of the index is pretty low.
5:21
But there might be a company down the bottom, number 499.
5:25
It might be at risk of dropping out.
5:28
Can you please be careful of the size into the microphone?
5:32
We were sorry for anyone listening, and if we sound breathy, we're doing our best to not,
5:37
it's just that we're getting used to some new much.
5:39
Just runs marathon.
5:40
Just bear with us.
5:41
Oh my God.
5:42
Sorry.
5:43
Sorry.
5:44
Sorry.
5:45
Just an ASMR.
5:46
Just an ASMR.
5:47
Oh, sorry.
5:48
Yeah.
5:49
So it's got $190 billion in sales.
5:54
$190 billion.
5:55
$190 billion.
5:56
Is that ever?
5:57
No, that's a year.
5:58
Oh, holy shit.
5:59
Massive.
6:00
Massive.
6:01
Yeah.
6:02
What does it even do?
6:03
Sorry.
6:04
Like, what is the company?
6:05
What do they sell?
6:06
So is it like it's not where they've got like heaps of different random shirts?
6:10
Yeah.
6:11
So that's what I'm going to get to about the uniqueness of this is that it's not just your average retailer.
6:15
So the key difference with Costco is that in order to shop, do you have to remember?
6:20
So you have to buy a membership.
6:23
Yeah.
6:24
Like kind of like Gilmore's here.
6:25
I don't know if that's still around.
6:26
Wow.
6:27
That sounds ancient.
6:28
Yeah.
6:29
So you can't just walk in and buy something.
6:30
You pay $60 a year.
6:32
So annually to be able to walk into a Costco store.
6:36
So you essentially, so to go into purchase anything from a Costco.
6:41
Costco?
6:42
Costco.
6:43
Costco.
6:44
You have to have paid $80 a year.
6:46
Sixty.
6:47
Sixty.
6:48
Sixty.
6:49
Sorry.
6:51
So it would be like if there was a new world and you had to have your one card to go and shop there.
6:56
Essentially.
6:57
Yeah.
6:58
And before you could check out, you have to swipe your card and make sure that you are a member to get the prices.
7:04
And it's not like there's a higher price for non-members.
7:07
It's literally like you need to be a member to check out and to buy the goods really.
7:13
Is there many companies like this in the world?
7:16
No.
7:17
So this is why it's quite unique, because it's not like your average retailer.
7:20
It's kind of like a Netflix.
7:21
It's a membership.
7:22
Yes.
7:23
Yeah.
7:24
So it's like a membership for Netflix, but then having to pay for movies on top of it.
7:27
Yeah.
7:28
So you still have to pay for your goods when you go to buy them, but you get ridiculously low prices.
7:35
Okay.
7:36
And the way that, because most retailers, they're all about their margin.
7:42
You know, because it's that's their revenue minus their costs and then that's their profit.
7:47
And so the profit is what is left over at the end of the day from your revenue, essentially, after you pay to your expenses.
7:55
So if you can reduce the amount you're paying for those goods, you're going to have more profit.
8:02
They have ridiculously low margins.
8:05
So what they're making at the end of the day, what their profit versus their revenue is is really, really low.
8:13
So it's like one, two percent.
8:16
So how do they get goods so much cheaper than other people?
8:20
Yeah.
8:21
So this is what's because they're so large and they're the fifth retailer, the third largest retail in the world.
8:26
They put it back on their suppliers and they say if you don't give us the best possible price
8:34
or even take a hit to your own margin, we just want to stock you.
8:39
We want to stock you.
8:40
Yeah.
8:41
So they go to Pepsi and they say give us, give us your Pepsi at the best possible price or we want to stock you.
8:51
And therefore they won't get the market share, the Pepsi won't get the market share.
8:54
If they're like, oh, this is the last price we can do as a dollar can.
8:57
And then Costco's like, okay, cool.
8:59
Well, we'll get Coke because they could do it.
9:02
But how would they have started that business?
9:04
And it's successful in the beginning though.
9:06
Because you've got the membership money.
9:08
Yeah, but but they wouldn't have at the start.
9:10
You know, when they first started and they had a hundred members.
9:13
But you do it at a local level and you'd go, okay, the sock retailer.
9:18
Is that they open these massive, massive big box stores.
9:21
So you think like a might attend mega or like a Walmart, they're huge stores.
9:29
They've run, they've run flocks there because they're getting the deal, the lowest price and they know they're getting the lowest price.
9:35
It's almost like Costco puts the customer first and I know retailers say that.
9:41
But they don't, they're worried about their own financials and their own employees and their own shareholders.
9:47
That these, but the management team of Costco literally put the customer first, making sure that they get the lowest price.
9:54
That that's their model is that to make sure that the rate that, so the customer gets the lowest price.
10:00
Because otherwise their whole business model will unravel because you, what would you, what would you be paying for?
10:05
You're paying $60 a year to get the same prices down the road.
10:09
Do you know what I mean?
10:10
There has to be some kind of incentive.
10:13
And from a business point of view, that membership revenue is a hundred percent margin.
10:19
So they get, they have two revenue streams essentially.
10:22
So they've got the revenue, the membership and then the actual selling of the goods.
10:27
So even though we say they're a retailer, they're not really, they're like a membership.
10:32
That's certainly that.
10:34
But the reason I wanted to write this company today was because it is a great stock.
10:43
Well, great company for the environment that we're up to head into or are in at the moment.
10:49
Do you mean in terms of if they be expensive?
10:51
In terms of inflation, in terms of slowing economy, in terms of consumers feeling a bit more.
11:00
Scared of spending money?
11:01
Yeah, yeah.
11:02
Having less disposal income, all that kind of thing.
11:04
Because these guys have the lowest prices.
11:09
There's a, what we call a trade down.
11:13
So you're instead of going to some fancy chicken shop, you might go to KFC, you know,
11:19
instead of shopping at the fancy supermarket or Farrow, you're going to shop it back and say, well,
11:25
Aldi, you know, it's when you when you're like, oh, okay, I can't actually shop there anymore.
11:29
I'm going to or you're just a bit more conscious about say money where you can.
11:33
So this just feeds straight into Costco's.
11:37
This is not all because it means.
11:39
They're always guaranteeing the lowest prices.
11:41
Yeah.
11:42
So Costco, are you clever?
11:44
Yeah.
11:45
So it's quite good in that respect that they do well when times are tough.
11:51
Because I guess, yeah, it's hard isn't it?
11:55
Because you go to the supermarket at the moment and everything's expensive.
11:59
There's not really a deal.
12:01
No.
12:02
Oh, I don't find anyway.
12:03
And maybe I'm not shopping at the right places.
12:05
But I certainly don't go and think, oh, it's okay.
12:07
I'll be able to find the cheapest price for yes, washing liquid or the cheapest avocados.
12:12
Even if I'm actively looking, I feel like everything's just like, oh, this is less expensive than that.
12:18
But that's expensive.
12:19
But it's still expensive.
12:20
Whereas if you were going somewhere and you knew that that was the cheapest price as you could get,
12:24
it's a no brain.
12:25
Yeah.
12:26
So you can go there and know you're getting a deal.
12:28
And they sell everything like jewelry, DVD players, couches, coffins.
12:35
So it's like an effort.
12:37
It's absolutely everything.
12:38
So you wouldn't go there to get your local fruit and veg.
12:41
I mean, they do have meat and chicken and they do have food and stuff.
12:45
They're one of the largest buyers of chicken in the US.
12:51
I know you like gross.
12:53
Gross.
12:54
But in terms of that, you, it's kind of like the Zara model, you know, you, they always change their product.
13:02
So you keep going back to seeing what is, what is a good deal or what products they have.
13:06
Because it's never, it's never the same a number of what we call skews, which is stock keeping units.
13:12
They change it all the time.
13:14
They keep that very, very narrow.
13:16
So they don't only have, I don't know how many, but yeah, they don't only have a very limited number of skews.
13:21
Also, it's categories.
13:22
Well, it's like a stock keeping unit.
13:24
So it's like distroshing powder, no pad, chicken.
13:29
They keep it very narrow.
13:31
So they can buy large, large quantities of this stuff.
13:34
Like, if you think of a rate, your typical retailer say a came out or a target.
13:38
Like, how many products are in those stores?
13:41
But they just cost.
13:42
No, I know, but Costco wouldn't be nearly as much as that.
13:46
It would have five shelving units instead of five.
13:49
And it would have just white socks that were, say, 20 cents, 50 cents, rather than pink, purple, black, yellow.
14:00
You know what I mean?
14:01
Like, it's kind of, yeah, it's.
14:03
So they have everything, but they don't have millions of different types of that thing.
14:07
And that's why that they get such good prices, because they go to Nike, for example.
14:12
So they will only stock your shoes or whatever.
14:14
Only stock one running shoe.
14:16
Yeah.
14:17
Yeah.
14:18
And then Nike takes the hit on the margin because they want their products to be in a shop that has.
14:24
A Costco that has like so much foot traffic from people coming in.
14:28
Wow.
14:29
Yeah.
14:30
So it's kind of, it's just like a reverse.
14:31
They've flipped the flip the switch.
14:34
It's like some wrap song or something.
14:37
Flip the switch.
14:38
They have put it back on the retail of the suppliers.
14:42
Sorry.
14:43
And says, you need to give us the best price rather than them taking it and saying, look, we're going to buy for a dollar.
14:50
But we can only sell for a dollar 10 because we want our customer to get the best price.
14:54
They're going to say Pepsi, for example, and saying, give us that for 80 cents because we need to sell it for a dollar 10.
15:02
So this is a sticky customer base.
15:05
Yes.
15:06
And it's also a clear revenue stream.
15:09
Yes.
15:10
Does that happen?
15:11
Do you know vaguely how many people are in business?
15:14
Surely that's the first thing you could go with your research stock.
15:19
Hold the line, caller.
15:21
Wow.
15:22
How many?
15:23
106 million members.
15:28
106 million times that by 60.
15:31
Can we figure that out?
15:32
I want to know what their revenue is.
15:34
This is yearly.
15:35
Average.
15:36
Yeah.
15:37
That is so many.
15:39
Oh, so their revenue is 190 billion.
15:41
We said that in that.
15:42
Oh, wow.
15:43
Yeah.
15:44
Look.
15:45
Oh, yeah, let's figure that out.
15:46
That's a group.
15:47
Is that including products?
15:48
That is.
15:49
Yeah, sorry.
15:50
So 6.4 billion.
15:52
That's million.
15:53
Billion.
15:54
6.4 billion.
15:55
Holy shit.
15:57
Yeah.
15:58
So that's what's coming through the door.
16:00
We are selling anything physical.
16:03
Yeah.
16:04
Wow.
16:05
I know.
16:06
Crazy.
16:07
So they've got $5 billion on the balance sheet to do what they please with.
16:11
And they've only just started.
16:13
They've got, you know, they've just entered China.
16:16
They've just entered New Zealand.
16:18
They've just, you know, there's a lot.
16:19
New Zealand and China are slightly different size markets.
16:23
But you know, they've just like Taiwan is one of their highest performing stores.
16:29
And so is South Korea.
16:31
So, you know, that there is a appetite for it in Asia.
16:35
So they're going to roll out through Asia.
16:37
They've also got, you know, they haven't even touched online or e-commerce.
16:41
Um, slightly difficult to do that.
16:43
But I think just because the model works.
16:46
So it would be.
16:47
It would go in New Zealand.
16:48
Yeah.
16:49
So this is actually a really interesting story is that I actually met the management team.
16:54
We did it.
16:55
And this time you're like, I've got a really funny story.
16:58
And then you're like, it's like not funny at all.
17:00
Is it interesting?
17:01
And I found $100 just to make it sound a bit interesting.
17:04
No, no, this is, it kind of comes down to their whole ethos because they're all about not having any fancy buildings.
17:10
It's really no frills, anything like that.
17:13
And I went like, this is a top 10 company in the US.
17:19
And I was like a nervous little analyst.
17:21
I told you.
17:22
Um, 20.
17:26
It's five.
17:27
I'm like, what?
17:30
25 I think.
17:31
Yeah, I can't remember.
17:32
Just before we started the podcast, but can you share the story of what happened with your age?
17:37
Someone asked.
17:38
Oh, yeah.
17:39
Gladly.
17:40
I was in a meeting and this young guy was like, we're talking about universities.
17:47
And I was like, oh, you need to, did you go to and he's like, oh, this one in Melbourne.
17:50
And I said, oh, cool.
17:51
And then he's like, oh, what you need to do.
17:52
I was like, oh, Christchurch.
17:53
What can it be?
17:54
You need in Christchurch.
17:55
And he's like, oh, what year did you graduate?
17:57
I was like, oh.
17:58
And he was talking to me like, are you like, are you okay then?
18:05
I was like, oh, I can't remember.
18:06
It was like a long time ago.
18:08
And he was like, whoa, when did you graduate?
18:10
And I was like, all right, 12 years ago.
18:11
He's like, whoa.
18:15
And he's like, well, actually.
18:17
And I was like, oh, I got a K like chill out, bro.
18:19
And I was like, yeah.
18:22
And he's like, how old are you?
18:23
I was like, oh, I'm like nearly 34.
18:25
And he was just like, are you?
18:26
Well, you look like you're in your 20s.
18:28
And I was like, sorry, what?
18:29
Sorry.
18:30
But also like, I reckon that the idea of a 30 year old or 30 months is like a chance.
18:37
Yeah, yeah.
18:38
The line was when I was at age.
18:40
And now I'm like, no, 30s, 30s fun.
18:42
15.
18:43
15.
18:45
But back to the story.
18:47
Yes, sorry.
18:48
So we know it was in my 20s, which is just very recent.
18:53
I think very recent.
18:54
Sorry, sorry, sorry.
18:55
Yesterday.
18:56
Yeah, we went to on a trip to the US to visit a holiday US company, and Costco was one of them.
19:01
And we turned up at there, headquarters.
19:03
And I was like, super nervous.
19:04
This is a, you know, top team company in the US.
19:09
And so is this back in the day when you travel for these meetings opposed to just zooming?
19:12
Yes.
19:13
Yeah.
19:14
And you do, you do kind of one or two global trips a year and visit companies.
19:18
And so this is a big deal.
19:20
This is a career highlight.
19:21
Yeah.
19:22
Yeah.
19:23
This was when I went to visit Warren Buffett there.
19:24
It was a career highlight.
19:25
Oh, yeah.
19:26
And he was like, the tiniest little speck on the stage.
19:28
Is it because you were nose blade seeds?
19:29
Yeah.
19:30
Like the very back.
19:31
Yeah.
19:32
Yeah, definitely.
19:33
And yeah, we turned up at this, at the Costco headquarters.
19:37
And it was like I had walked into a category office space.
19:45
Wow.
19:46
It was just like bare desks, real basic meeting rooms.
19:52
No out on the walls.
19:54
Like pretty like a flood from New Zealand guys.
19:57
Like where are the flowers?
19:59
Yeah.
20:00
Yeah, exactly.
20:01
There's the scones.
20:03
But yeah, but it was, it was kind of, those are the companies who want to be investing in.
20:07
You don't want to be investing in the ones with the flashy offices that are spending all shareholder's money on,
20:12
on having the most decked out like chairs and tables.
20:17
And yes, they've obviously got to make it a nice space for their employees to work in.
20:22
But there is something to be said.
20:24
And I've definitely noticed it when you go to company headquarters and it's really no frills.
20:31
And that's the Costco.
20:33
It would be, I can boring to work in a place like that though.
20:36
Yeah.
20:37
Like you've got to wonder what employee satisfaction is like enjoying.
20:40
Yeah.
20:41
It feels like you're in.
20:42
But I mean, if all the staff had chairs, they probably don't really care.
20:44
True.
20:45
But.
20:46
Vista hats off.
20:47
Vista hats.
20:48
But yeah, no, but it was just kind of like, I was like, oh, that's why your website looks really basic.
20:53
And that's why your head office looks really basic because your whole brand,
20:57
brand is still not being no frills and all that.
21:01
So yeah, it was just quite interesting that they did what they said.
21:05
What about who owns it?
21:07
Like who are the general managers or the owners or the co-founders?
21:10
Are they still involved?
21:12
No, because it was the 50 year old.
21:14
All of us is a red flag.
21:15
Yes.
21:16
Well, no.
21:17
Yeah, I mean, it is, but it's also, I think when you've got a pretty defensive business model like this.
21:25
Yeah, it's kind of an okay one.
21:27
Well, for me, personally, yeah, I think in this current environment, with, you know, the world kind of changing into,
21:36
okay, what, what, what, what, what are people's spending habits going to be?
21:39
What are they not going to spend on?
21:40
What will they spend on?
21:41
And what companies were affected?
21:43
I think this is definitely one that will be an effect because we've had so many retailers come out like target,
21:51
came out and downgraded their earnings, which means they said that they were going to generate X and they've come out and said,
21:59
oh, no, we can't actually reach that because of inflation and because of our expenses are too high and customers aren't spending with us.
22:07
So, and then Walmart came out and said the same thing.
22:10
There's a whole lot of caution at the moment around retailers because we went into lockdown or went into COVID.
22:17
They halted all production.
22:19
Nothing, no goods were moving around the world.
22:21
And then it was like, oh, this thing isn't actually as bad as we first thought.
22:25
And the economy rebounded really strongly.
22:28
Everyone was outspending or everyone had so much savings to spend.
22:31
And then the retailers like, shit, we need to get inventory to the stores ASAP.
22:37
You know, but we can't because there's so much congestion logistically.
22:41
So, then now the ones that have had high inventory, which is a historically bad thing because...
22:47
It's not, they're not selling it, they're just holding it and there's a cost to holding it.
22:52
Those retailers now are going, oh, shit, the customer might not actually spend and we've got to this inventory.
23:00
So, the poor retailers, it had such a tough time, like Trina Gess, it's like, oh, consumers, consumers not spending, consumers spending, consumers not spending.
23:08
And they're just trying to manage all this inventory, which you have to order sometimes like six-day month in advance.
23:13
So, this is what's happened with the likes of Target and Walmart.
23:16
And we'll probably see a lot of other retailers come out as well and give kind of profit warnings or, you know, commentary saying that the environment's getting worse.
23:27
So, this is why it's really good for Costco because then they can go to those companies and go, okay, cool, we'll take it off your hands.
23:33
Oh, so they're just buying products as well.
23:36
So, not just going to the, who produces it, but actually going to...
23:39
Yes, so if the retailers have their own suppliers, that's a Nike.
23:43
They have their own stores and they also have their own manufacturer as well.
23:47
You could go to them, for example, and say, hey, you know, we can take it off your hands or...
23:52
So, there's kind of that benefit as well.
23:54
But also, if you think about your spending habits, we kind of touched on this before I guess around...
23:59
You know, you might be a bit more conscious around saving money where you can.
24:03
So, it's like, hey, you know, I might actually go buy my chicken and my...
24:07
Coffin from...
24:09
I'm not getting a coffin or chicken.
24:13
So, like, what's this relation to my...
24:15
No, you might instead of going and buying an engagement ring from a super fancy store, you might go get a different Costco.
24:23
Sorry.
24:26
Okay.
24:27
That was just like a double whammy, you know?
24:29
Not only you single, but if you're getting engaged, your Hannah is buying the ring from Costco.
24:34
Yeah.
24:35
I mean, to be fair, I don't even care.
24:37
You're like someone that loves you.
24:39
No.
24:43
I know you're taking the purse right now.
24:45
But seriously, like...
24:46
No, I don't want you to find someone that loves it.
24:48
I want it.
24:49
After I took my supper, it's really not working.
24:53
Sorry.
24:56
I love you.
24:57
Thank you.
25:00
What was my point?
25:01
I don't care about rings from Costco, it was my point.
25:04
So, if we look at how this company has done, so it's share price over the last year is up 22%.
25:12
Wow.
25:13
Yeah.
25:14
And that's when the market's down about 9% over the last 12 months.
25:19
Yeah, so their revenue has doubled over the past decade.
25:24
So it was 80 billion to 190 billion in sales.
25:29
And their income, so their profit has tripled.
25:34
So that's a really good sign of a pretty impressive business model.
25:39
When you can grow your earnings or your profit faster than your revenue.
25:44
So I think this is good.
25:46
We talk about all these high growth companies and everything.
25:49
Yes, I mean, they've done fantastically well in terms of their revenue growth and their profit growth.
25:54
But I think the defense of nature of the business.
25:58
It's got a moat.
26:00
Is that what you're up to say?
26:02
You took the words out of them now.
26:04
So this is called A.
26:06
Or is it just called a moat?
26:07
Oh, yeah.
26:08
So their point of difference is that the bigger they get, the better buying power they can get.
26:13
And all that kind of stuff.
26:15
And then it's far easier to do online.
26:17
And then it's easier to, you know, but like one of the most interesting things is that they only accept Visa.
26:24
Because Visa gives them a better rate than Mastercard.
26:27
Well, so they're like down to the brats.
26:31
They're like, well, not me.
26:32
Yes, you.
26:33
I'm not going to do up.
26:34
We won't come with you.
26:35
But that's what you want to retell to be doing for you as a consumer.
26:39
Yes, I do.
26:40
Yeah.
26:41
I don't want them to be like, oh, no, we'll go with Mastercard.
26:44
Or whoever gives us the biggest, the biggest effects.
26:47
Yeah, right.
26:48
Yeah.
26:49
They're really thinking about everything.
26:50
Yeah.
26:51
Absolutely everything.
26:52
They even sell petrol.
26:53
Wow.
26:54
Yeah.
26:55
And get the lowest price from that.
26:56
So they're thinking about everything.
26:57
Yeah.
26:58
Which is quite.
26:59
I reckon my dad would love the shop.
27:01
Yeah.
27:02
He's such a bargain hunter.
27:03
Yeah.
27:04
Yeah.
27:05
Yeah.
27:06
So there's two police, the shareholders, their customers, their employees, all their stakeholders.
27:13
You know, like it's a pretty difficult job.
27:16
It's been shipping that big.
27:17
If you had 800 stores, imagine how many employees there would be.
27:20
Whereas for them, looking after their customers has benefited their shareholders and their employees
27:29
who assume their shareholders as well.
27:31
You know, like this kind of it.
27:33
Yeah.
27:35
Business model that I think is really interesting.
27:37
Have you invested in them before?
27:39
I have.
27:40
Yeah.
27:41
Yeah.
27:42
Finding a quality business that has still got a ton of growth opportunities.
27:48
And has a proven model that has worked for nearly 50 years.
27:55
Do you still think there's huge growth opportunities?
27:58
So they've only just entered China.
28:00
Right.
28:01
You know, and the current stores that they have in Taiwan, China and Korea, their top
28:05
performing stores.
28:07
So that shows that there's appetite in those culturally different markets to the US.
28:13
Okay.
28:14
So there's big growth opportunities.
28:16
Yes.
28:17
They're already really successful.
28:18
They've got heaps of money on their balance sheet, future projection in terms of their revenue.
28:24
Yes.
28:26
And they've been around forever and done fantastically well to date.
28:35
And I say that because they've been through cycles like this that we're seeing of tough economic conditions
28:43
or, you know, they've been through cycles where people might not spend as much at their stores
28:50
or go by expensive stuff because they're feeling good about their situation.
28:55
They've been through so many different consumer situations and they've still managed to do well.
29:01
So the fact that they've still, that they had over 90% renewal rates on their subscriptions
29:06
means that people obviously find it.
29:08
Really 90% renewal.
29:09
Wow.
29:10
That's like a very high percentage of people.
29:13
It's actually on a hundred and hundred and six million.
29:17
Shit.
29:18
People.
29:19
It's like 90 million renewer.
29:21
Yeah.
29:22
Roughly.
29:23
Give it a take.
29:24
Around and out.
29:26
Last spring calculator.
29:28
Costco.
29:29
Who would have thought?
29:30
Who would have thought?
29:31
Quite the invisible.
29:32
Haven't actually been to the one here in New Zealand.
29:34
Might have to.
29:35
Should we do a team trip?
29:36
Yes.
29:37
Oh my god.
29:38
A curved trip.
29:39
We should have done this.
29:40
Sit up this podcast.
29:42
You guys start mind if we just sit up in the middle of the store and talk about it.
29:45
I was thinking more along lines of like it's already been a technical nightmare.
29:48
Sitting up in your office.
29:50
If we were then on top of that, we're trying to do it in like an on location.
29:53
I would have been so stressed.
29:54
Just shoppers.
29:55
Shush, please.
29:56
Stop breathing loudly around us.
29:58
We're picking it up on the mic.
30:00
Oh, yeah.
30:01
Oh, thank you so much, Vic.
30:02
That sounds like it one I'm going to go and look at more.
30:04
Can I buy it?
30:05
Yep.
30:06
It's all on DIY platform.
30:07
Yes.
30:08
Yeah.
30:09
And now topics for 2022.
30:11
Oh, is it?
30:12
Hmm.
30:13
So you're reusing material now, are you?
30:15
No, I'm just reinforcing.
30:17
Trying to get you run to go out there and buy it so that it actually does well in 2022.
30:21
All our lessons, we're going to really move this year for us, you know?
30:24
Oh, they'll be amazing when that happens.
30:26
Yeah.
30:27
One day.
30:28
Yeah, yeah, yeah.
30:29
How should the girls?
30:32
Thank you so much for joining us for today's episode of Raising the Curve.
30:36
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30:40
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30:44
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30:47
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