Costco rarely does anything revolutionary.
In addition to being a leader in the membership-based retail club model, along with Walmart's Sam's Club, the retailer never pushes the boundaries when it comes to technology.
costco (COST) – Get a free report it waits for rivals like Amazon, Walmart and Target to invent things, test them on consumers, and then cherry-pick the ideas that will work for its members. It's a laborious strategy that has left the warehouse club far behind its rivals when it comes to the digital side of its business.
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That's not a defect or a mistake, it's Costco's design. When your entire business model revolves around offering low prices, it makes sense not to invest in extras. The chain offers easy shopping, but has added things like digital delivery through Instacart because they bring value to members.
As a company, Costco treats its capital very carefully. This is not a company that takes executives on sightseeing trips or invites the media to dinner at big trade shows. Costco barely has a public relations team, and while the company has invested in its website over the past year, it is very focused on user experience, not things consumers don't need.
Now, Costco has done something with its war chest. CEO Richard Galanti has been suggesting it would happen for more than a year.
Image source: Patricio T. FALLÓN / AFP) (Photo by PATRICK T. Fallon/AFP via Getty Images
Costco pays its fifth special dividend
Costco, like many companies, pays its shareholders a quarterly dividend. This is a cash payment to the people who own its shares to essentially pay them for being co-owners of the company.
Four times in its history Costco has offered a special dividend. This is an extra payment that is made when the board of directors decides so.
“We've done four specials. And as one of the board members said, we're a bit quirky and it seems to have worked for us. So it's certainly an arrow in our quiver, but we haven't made any decisions at this point. ” Galanti said during an earnings conference call last year.
He's been hinting that the retailer would offer another one since the warehouse club first quarter results call in December 2022.
Now, the board of directors has approved a fifth extraordinary dividend and it is not a small amount.
“The Board of Directors has declared a special cash dividend on Costco common stock of $15 per share, payable on January 12, 2024, to shareholders of record as of the close of business on December 28, 2023. The total amount of the payment will be approximately $6.7 billion,” Costco shared in a press release.
Costco has a lot of cash
Costco has a huge business. In the first quarter, the company reported net sales of $56.72 billion, an increase of 6.1% from $53.44 billion in the first quarter of fiscal 2023, ended Nov. 20. of 2022.
Its operating profits also improved. Net income for the quarter was $1,589 million, $3.58 per diluted share, compared to $1,364 million, $3.07 per diluted share, last year.
The warehouse club closed the quarter with about $18 billion in cash and cash equivalents. That means the special dividend will reduce its cash to just over $11 billion. Costco had about $5 billion in operating costs during the first quarter and most of its cash goes into inventory.
Costco currently has about $18 billion in inventory on its books. That's up from $16.6 billion in the same period last year, when the company faced supply chain disruptions and a difficult-to-predict holiday season due to the Covid pandemic.
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