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Costco Wholesale Corp (NAS:COST)
Gross Margin
12.56% (As of May. 2014)

Gross Margin is calculated as gross profit divided by its revenue. Costco Wholesale Corp's gross profit for the three months ended in May. 2014 was $3,240 Mil. Costco Wholesale Corp's revenue for the three months ended in May. 2014 was $25,794 Mil. Therefore, Costco Wholesale Corp's Gross Margin for the quarter that ended in May. 2014 was 12.56%.

COST' s 10-Year Gross Margin Range
Min: 10.18   Max: 12.79
Current: 12.56

10.18
12.79

During the past 13 years, the highest Gross Margin of Costco Wholesale Corp was 12.79%. The lowest was 10.18%. And the median was 12.48%.

COST's Gross Marginis ranked lower than
100% of the Companies
in the Global Discount Stores industry.

( Industry Median: vs. COST: 12.56 )

Costco Wholesale Corp had a gross margin of 12.56% for the quarter that ended in May. 2014 => No sustainable competitive advantage

The 3-Year average Growth Rate of Gross Margin for Costco Wholesale Corp was -0.10% per year.


Definition

Gross Margin is the percentage of Gross Profit out of sales or Revenue.

Costco Wholesale Corp's Gross Margin for the fiscal year that ended in Aug. 2013 is calculated as

Gross Margin (A: Aug. 2013 )=Gross Profit (A: Aug. 2013 ) / Revenue (A: Aug. 2013 )
=13208 / 105156
=(Revenue - Cost of Goods Sold) / Revenue
=(105156 - 91948) / 105156
=12.56 %

Costco Wholesale Corp's Gross Margin for the quarter that ended in May. 2014 is calculated as

Gross Margin (Q: May. 2014 )=Gross Profit (Q: May. 2014 ) / Revenue (Q: May. 2014 )
=3240 / 25794
=(Revenue - Cost of Goods Sold) / Revenue
=(25794 - 22554) / 25794
=12.56 %

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.


Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

Costco Wholesale Corp had a gross margin of 12.56% for the quarter that ended in May. 2014 => No sustainable competitive advantage


Be Aware

If a company loses its competitive advantages, usually its gross margin declines well before its sales declines. Watching Gross Margin and Operating Margin closely helps avoid value trap situations.


Related Terms

Operating Margin, Cost of Goods Sold, Gross Profit, Revenue


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Costco Wholesale Corp Annual Data

Aug04Aug05Aug06Aug07Aug08Aug09Aug10Aug11Aug12Aug13
Gross Margin 12.5112.4712.3112.3512.3912.7212.7712.5712.4212.56

Costco Wholesale Corp Quarterly Data

Feb12May12Aug12Nov12Feb13May13Aug13Nov13Feb14May14
Gross Margin 12.3112.4612.4412.6012.4812.6412.5312.7612.4012.56
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