Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Costco Wholesale Corp. (NASDAQ:COST)

Analysis of Inventory

Advanced level

Inventory Disclosure

Costco Wholesale Corp., balance sheet: inventory

US$ in millions

Microsoft Excel LibreOffice Calc
Aug 30, 2020 Sep 1, 2019 Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015
United States 8,871  8,415  8,081  7,091  6,422  6,427 
Canada 1,310  1,123  1,189  1,040  1,015  — 
Other International 2,061  1,857  1,770  1,703  1,532  2,481 
Merchandise inventories 12,242  11,395  11,040  9,834  8,969  8,908 

Based on: 10-K (filing date: 2020-10-07), 10-K (filing date: 2019-10-11), 10-K (filing date: 2018-10-26), 10-K (filing date: 2017-10-18), 10-K (filing date: 2016-10-12), 10-K (filing date: 2015-10-14).

Item Description The company
Merchandise inventories Amount after valuation and LIFO reserves of inventory expected to be sold, or consumed within one year or operating cycle, if longer. Costco Wholesale Corp.’s merchandise inventories increased from 2018 to 2019 and from 2019 to 2020.

Adjustment to Inventory: Conversion from LIFO to FIFO

Adjusting LIFO Inventory to FIFO (Current) Cost

US$ in millions

Microsoft Excel LibreOffice Calc
Aug 30, 2020 Sep 1, 2019 Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015
Adjustment to Merchandise Inventories
Merchandise inventories at LIFO (as reported) 12,242  11,395  11,040  9,834  8,969  8,908 
Add: Inventory LIFO reserve —  —  —  (64) —  82 
Merchandise inventories at FIFO (adjusted) 12,242  11,395  11,040  9,770  8,969  8,990 
Adjustment to Current Assets
Current assets (as reported) 28,120  23,485  20,289  17,317  15,218  17,299 
Add: Inventory LIFO reserve —  —  —  (64) —  82 
Current assets (adjusted) 28,120  23,485  20,289  17,253  15,218  17,381 
Adjustment to Total Assets
Total assets (as reported) 55,556  45,400  40,830  36,347  33,163  33,440 
Add: Inventory LIFO reserve —  —  —  (64) —  82 
Total assets (adjusted) 55,556  45,400  40,830  36,283  33,163  33,522 
Adjustment to Total Costco Stockholders’ Equity
Total Costco stockholders’ equity (as reported) 18,284  15,243  12,799  10,778  12,079  10,617 
Add: Inventory LIFO reserve —  —  —  (64) —  82 
Total Costco stockholders’ equity (adjusted) 18,284  15,243  12,799  10,714  12,079  10,699 
Adjustment to Net Income Attributable To Costco
Net income attributable to Costco (as reported) 4,002  3,659  3,134  2,679  2,350  2,377 
Add: Increase (decrease) in inventory LIFO reserve —  —  64  (64) (82) (27)
Net income attributable to Costco (adjusted) 4,002  3,659  3,198  2,615  2,268  2,350 

Based on: 10-K (filing date: 2020-10-07), 10-K (filing date: 2019-10-11), 10-K (filing date: 2018-10-26), 10-K (filing date: 2017-10-18), 10-K (filing date: 2016-10-12), 10-K (filing date: 2015-10-14).

Costco Wholesale Corp.’s inventory value on Aug 30, 2020 would be $12,242  (in millions) if the FIFO inventory method was used instead of LIFO. Costco Wholesale Corp.’s inventories, valued on a LIFO basis, on Aug 30, 2020 were $12,242 . Costco Wholesale Corp.’s inventories would have been $—  higher than reported on Aug 30, 2020 if the FIFO method had been used instead.


Costco Wholesale Corp., Financial Data: Reported vs. Adjusted


Adjusted Financial Ratios: LIFO vs. FIFO (Summary)

Costco Wholesale Corp., adjusted financial ratios

Microsoft Excel LibreOffice Calc
Aug 30, 2020 Sep 1, 2019 Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015
Current Ratio
Reported current ratio (LIFO) 1.13 1.01 1.02 0.99 0.98 1.05
Adjusted current ratio (FIFO) 1.13 1.01 1.02 0.99 0.98 1.05
Net Profit Margin
Reported net profit margin (LIFO) 2.45% 2.45% 2.26% 2.12% 2.02% 2.09%
Adjusted net profit margin (FIFO) 2.45% 2.45% 2.31% 2.07% 1.95% 2.07%
Total Asset Turnover
Reported total asset turnover (LIFO) 2.94 3.29 3.39 3.47 3.50 3.40
Adjusted total asset turnover (FIFO) 2.94 3.29 3.39 3.48 3.50 3.39
Financial Leverage
Reported financial leverage (LIFO) 3.04 2.98 3.19 3.37 2.75 3.15
Adjusted financial leverage (FIFO) 3.04 2.98 3.19 3.39 2.75 3.13
Return on Equity (ROE)
Reported ROE (LIFO) 21.89% 24.00% 24.49% 24.86% 19.46% 22.39%
Adjusted ROE (FIFO) 21.89% 24.00% 24.99% 24.41% 18.78% 21.96%
Return on Assets (ROA)
Reported ROA (LIFO) 7.20% 8.06% 7.68% 7.37% 7.09% 7.11%
Adjusted ROA (FIFO) 7.20% 8.06% 7.83% 7.21% 6.84% 7.01%

Based on: 10-K (filing date: 2020-10-07), 10-K (filing date: 2019-10-11), 10-K (filing date: 2018-10-26), 10-K (filing date: 2017-10-18), 10-K (filing date: 2016-10-12), 10-K (filing date: 2015-10-14).

Financial ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by current liabilities. Costco Wholesale Corp.’s adjusted current ratio deteriorated from 2018 to 2019 but then improved from 2019 to 2020 exceeding 2018 level.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Costco Wholesale Corp.’s adjusted net profit margin ratio improved from 2018 to 2019 and from 2019 to 2020.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Costco Wholesale Corp.’s adjusted total asset turnover ratio deteriorated from 2018 to 2019 and from 2019 to 2020.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Costco Wholesale Corp.’s adjusted financial leverage ratio decreased from 2018 to 2019 but then slightly increased from 2019 to 2020.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Costco Wholesale Corp.’s adjusted ROE deteriorated from 2018 to 2019 and from 2019 to 2020.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Costco Wholesale Corp.’s adjusted ROA improved from 2018 to 2019 but then deteriorated significantly from 2019 to 2020.

Costco Wholesale Corp., Financial Ratios: Reported vs. Adjusted


Adjusted Current Ratio

Microsoft Excel LibreOffice Calc
Aug 30, 2020 Sep 1, 2019 Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015
As Reported
Selected Financial Data (US$ in millions)
Current assets 28,120  23,485  20,289  17,317  15,218  17,299 
Current liabilities 24,844  23,237  19,926  17,495  15,575  16,540 
Liquidity Ratio
Current ratio1 1.13 1.01 1.02 0.99 0.98 1.05
Adjusted: After Conversion from LIFO to FIFO
Selected Financial Data (US$ in millions)
Adjusted current assets 28,120  23,485  20,289  17,253  15,218  17,381 
Current liabilities 24,844  23,237  19,926  17,495  15,575  16,540 
Liquidity Ratio
Adjusted current ratio2 1.13 1.01 1.02 0.99 0.98 1.05

Based on: 10-K (filing date: 2020-10-07), 10-K (filing date: 2019-10-11), 10-K (filing date: 2018-10-26), 10-K (filing date: 2017-10-18), 10-K (filing date: 2016-10-12), 10-K (filing date: 2015-10-14).

2020 Calculations

1 Current ratio = Current assets ÷ Current liabilities
= 28,120 ÷ 24,844 = 1.13

2 Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= 28,120 ÷ 24,844 = 1.13

Liquidity ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by current liabilities. Costco Wholesale Corp.’s adjusted current ratio deteriorated from 2018 to 2019 but then improved from 2019 to 2020 exceeding 2018 level.

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Aug 30, 2020 Sep 1, 2019 Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Costco 4,002  3,659  3,134  2,679  2,350  2,377 
Net sales 163,220  149,351  138,434  126,172  116,073  113,666 
Profitability Ratio
Net profit margin1 2.45% 2.45% 2.26% 2.12% 2.02% 2.09%
Adjusted: After Conversion from LIFO to FIFO
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Costco 4,002  3,659  3,198  2,615  2,268  2,350 
Net sales 163,220  149,351  138,434  126,172  116,073  113,666 
Profitability Ratio
Adjusted net profit margin2 2.45% 2.45% 2.31% 2.07% 1.95% 2.07%

Based on: 10-K (filing date: 2020-10-07), 10-K (filing date: 2019-10-11), 10-K (filing date: 2018-10-26), 10-K (filing date: 2017-10-18), 10-K (filing date: 2016-10-12), 10-K (filing date: 2015-10-14).

2020 Calculations

1 Net profit margin = 100 × Net income attributable to Costco ÷ Net sales
= 100 × 4,002 ÷ 163,220 = 2.45%

2 Adjusted net profit margin = 100 × Adjusted net income attributable to Costco ÷ Net sales
= 100 × 4,002 ÷ 163,220 = 2.45%

Profitability ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Costco Wholesale Corp.’s adjusted net profit margin ratio improved from 2018 to 2019 and from 2019 to 2020.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Aug 30, 2020 Sep 1, 2019 Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015
As Reported
Selected Financial Data (US$ in millions)
Net sales 163,220  149,351  138,434  126,172  116,073  113,666 
Total assets 55,556  45,400  40,830  36,347  33,163  33,440 
Activity Ratio
Total asset turnover1 2.94 3.29 3.39 3.47 3.50 3.40
Adjusted: After Conversion from LIFO to FIFO
Selected Financial Data (US$ in millions)
Net sales 163,220  149,351  138,434  126,172  116,073  113,666 
Adjusted total assets 55,556  45,400  40,830  36,283  33,163  33,522 
Activity Ratio
Adjusted total asset turnover2 2.94 3.29 3.39 3.48 3.50 3.39

Based on: 10-K (filing date: 2020-10-07), 10-K (filing date: 2019-10-11), 10-K (filing date: 2018-10-26), 10-K (filing date: 2017-10-18), 10-K (filing date: 2016-10-12), 10-K (filing date: 2015-10-14).

2020 Calculations

1 Total asset turnover = Net sales ÷ Total assets
= 163,220 ÷ 55,556 = 2.94

2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= 163,220 ÷ 55,556 = 2.94

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Costco Wholesale Corp.’s adjusted total asset turnover ratio deteriorated from 2018 to 2019 and from 2019 to 2020.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Aug 30, 2020 Sep 1, 2019 Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015
As Reported
Selected Financial Data (US$ in millions)
Total assets 55,556  45,400  40,830  36,347  33,163  33,440 
Total Costco stockholders’ equity 18,284  15,243  12,799  10,778  12,079  10,617 
Solvency Ratio
Financial leverage1 3.04 2.98 3.19 3.37 2.75 3.15
Adjusted: After Conversion from LIFO to FIFO
Selected Financial Data (US$ in millions)
Adjusted total assets 55,556  45,400  40,830  36,283  33,163  33,522 
Adjusted total Costco stockholders’ equity 18,284  15,243  12,799  10,714  12,079  10,699 
Solvency Ratio
Adjusted financial leverage2 3.04 2.98 3.19 3.39 2.75 3.13

Based on: 10-K (filing date: 2020-10-07), 10-K (filing date: 2019-10-11), 10-K (filing date: 2018-10-26), 10-K (filing date: 2017-10-18), 10-K (filing date: 2016-10-12), 10-K (filing date: 2015-10-14).

2020 Calculations

1 Financial leverage = Total assets ÷ Total Costco stockholders’ equity
= 55,556 ÷ 18,284 = 3.04

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Costco stockholders’ equity
= 55,556 ÷ 18,284 = 3.04

Solvency ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Costco Wholesale Corp.’s adjusted financial leverage ratio decreased from 2018 to 2019 but then slightly increased from 2019 to 2020.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Aug 30, 2020 Sep 1, 2019 Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Costco 4,002  3,659  3,134  2,679  2,350  2,377 
Total Costco stockholders’ equity 18,284  15,243  12,799  10,778  12,079  10,617 
Profitability Ratio
ROE1 21.89% 24.00% 24.49% 24.86% 19.46% 22.39%
Adjusted: After Conversion from LIFO to FIFO
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Costco 4,002  3,659  3,198  2,615  2,268  2,350 
Adjusted total Costco stockholders’ equity 18,284  15,243  12,799  10,714  12,079  10,699 
Profitability Ratio
Adjusted ROE2 21.89% 24.00% 24.99% 24.41% 18.78% 21.96%

Based on: 10-K (filing date: 2020-10-07), 10-K (filing date: 2019-10-11), 10-K (filing date: 2018-10-26), 10-K (filing date: 2017-10-18), 10-K (filing date: 2016-10-12), 10-K (filing date: 2015-10-14).

2020 Calculations

1 ROE = 100 × Net income attributable to Costco ÷ Total Costco stockholders’ equity
= 100 × 4,002 ÷ 18,284 = 21.89%

2 Adjusted ROE = 100 × Adjusted net income attributable to Costco ÷ Adjusted total Costco stockholders’ equity
= 100 × 4,002 ÷ 18,284 = 21.89%

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Costco Wholesale Corp.’s adjusted ROE deteriorated from 2018 to 2019 and from 2019 to 2020.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Aug 30, 2020 Sep 1, 2019 Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Costco 4,002  3,659  3,134  2,679  2,350  2,377 
Total assets 55,556  45,400  40,830  36,347  33,163  33,440 
Profitability Ratio
ROA1 7.20% 8.06% 7.68% 7.37% 7.09% 7.11%
Adjusted: After Conversion from LIFO to FIFO
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Costco 4,002  3,659  3,198  2,615  2,268  2,350 
Adjusted total assets 55,556  45,400  40,830  36,283  33,163  33,522 
Profitability Ratio
Adjusted ROA2 7.20% 8.06% 7.83% 7.21% 6.84% 7.01%

Based on: 10-K (filing date: 2020-10-07), 10-K (filing date: 2019-10-11), 10-K (filing date: 2018-10-26), 10-K (filing date: 2017-10-18), 10-K (filing date: 2016-10-12), 10-K (filing date: 2015-10-14).

2020 Calculations

1 ROA = 100 × Net income attributable to Costco ÷ Total assets
= 100 × 4,002 ÷ 55,556 = 7.20%

2 Adjusted ROA = 100 × Adjusted net income attributable to Costco ÷ Adjusted total assets
= 100 × 4,002 ÷ 55,556 = 7.20%

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Costco Wholesale Corp.’s adjusted ROA improved from 2018 to 2019 but then deteriorated significantly from 2019 to 2020.