Costco Has A Long Way To Drop Before It’s Fairly Valued

Costco shopping experience

Costco sells merchandise at heavy discounts through its warehouse clubs competing with large retailers like Wal-Mart, Target, BJ’s Wholesale Club and Sam’s Club.

We estimate that roughly 43% of the $49.76 Trefis price estimate for Costco’s stock can be attributed to its U.S. core merchandise division, through which the company offers bulk goods at discounted prices to members that pay an annual fee for access. Costco’s growth prospects are largely driven by potential expansion of its highly-successful business model into new U.S. markets.

The number of Costco U.S. Warehouse Clubs grew rapidly between 2006 and 2008, from 369 to 403. Over the past few years, however, a difficult economic climate has slowed expansion, with total US Warehouse Clubs now totaling roughly 416.

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We believe that there is ample room for continued U.S. expansion given Costco’s lower penetration in areas like the North East, and we anticipate an increased growth pace to follow an improving domestic economic outlook. We anticipate a re-acceleration in openings in the years ahead and forecast total stores hitting 454 by 2013.

However, aggressive domestic expansion could lead to over-saturation of target consumer markets. Should self-cannibalization hinder profit margins, the company could look to decelerate its U.S. growth pace and place greater emphasis on international expansion. We currently estimate that Costco’s International Core Merchandise Division accounts for roughly 19% of the company’s value.

You can modify the chart above based on your own perspective for Costco’s US expansion and assess the impact on the company’s stock value given flat revenue per square foot and profit margins. Or visit our site to perform more extensive analysis of Costco’s stock value.

See our full analysis for Costco here.

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Think before you speak: The walls have ears, diplomats told

Foreign diplomats in Pakistan cautioned in communicating with Americans.

ISLAMABAD:?As WikiLeaks continue to reveal embarrassing secrets about various governments, foreign diplomats in Pakistan have been told to be cautious when communicating with their American counterparts to avoid any such situation in the future.

Some top embassies in Islamabad have asked their staff “to be very watchful of what they say and who they say [it] to”. According to a diplomat, who spoke on condition of anonymity, some embassies have verbally instructed their staff and warned them to be careful of what they say, particularly while interacting with American diplomats.

“The diplomatic community in Islamabad now has a ?totally new perception of the Americans. Although WikiLeaks has not revealed anything great, it was an eye-opener for us all,” another Western diplomat told The Express Tribune, on condition of anonymity.

“I have not received any written notice or official instruction, but now we may not trust them (Americans) the way we used to,” said another diplomat. “There were a lot of things that we used to talk about, consciously or unconsciously, during candid conversations with the diplomatic community.”

According to a government official, diplomats are required to report back to their countries and it was unfortunate for Americans that their secrets had been revealed to the world. However, Pakistan being a “sensitive” posting, most of the diplomats agreed that they can land in trouble because of such leaks.

Speaking to The Express Tribune, US embassy’s spokesperson Alberto Rodriguez said that relationships are built over time and what has happened is ‘discomforting and unfortunate’. However, he refused to comment on whether diplomats had been instructed to be wary of Americans. “Those diplomats, if any, who have been instructed, should be asked this question,” he said. Rodriguez also confirmed that the US government had notified the Pakistani leadership about WikiLeaks in advance.

Foreign Office Spokesperson Abdul Basit said that Pakistan’s foreign ministry has not sent out any such instructions to its missions across the world. “The Foreign Office has full confidence in its diplomats [who are] selected and posted abroad,” he said.

US officials see drop in international cooperation

Some foreign governments are reducing engagement with US diplomats and other officials after the release of WikiLeaks documents, US officials said on Tuesday in a sign of potential lasting damage caused by the huge public dump of classified cables.

US Secretary of State Hillary Clinton has repeatedly vowed that the WikiLeaks releases will not derail key US relationships despite the embarrassing revelations of candid US assessments of foreign governments and leaders.

But officials at both the State Department and the Pentagon said on Wednesday that some foreign governments were already pulling back.

“We have gotten indications that there is at least some change in how individuals and governments cooperate with us, and share information,” Colonel Dave Lapan, a Pentagon spokesperson, said.

Lapan renewed concerns that the would-be informants or established intelligence sources might not be coming forward out of fear that they could be exposed, or that governments might become more “circumspect with the information they share.”

“It’s hard to quantify. But again we do get a sense that there has been some pulling back because of these revelations,” Lapan said.

State Department spokesman PJ Crowley said there were no plans for a large-scale reshuffle of US diplomatic personnel who may have been compromised by the WikiLeaks documents.

But he conceded that in some cases foreign governments were approaching US diplomatic contacts with new skepticism.

“We do recognize that, on a country-by-country basis, there could well be some impacts,” Crowley told a news briefing.

The US assessment of WikiLeaks-related damage came as the group’s founder Julian Assange was arrested in Britain on allegations of sex crimes in Sweden.

Crowley declined to comment on what he said was a legal matter, but dismissed suggestions that WikiLeaks had somehow stumbled upon “a vast global conspiracy centered on the United States.” (With additional input from Reuters)

Published in The Express Tribune, December 9^th, 2010.

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Email 101: Think before you send

Email is, at times, an irresponsibly-handled medium and many organisations today are grappling with usage of business emails. Email policies often fail to provide a solution to workplace email issues, which can be a problem for the 1.4 billion users of the technology.

One of the issues is overdependency on this medium. Participants at my email etiquette workshops have time and again complained that they receive too many emails. We end up using email to accomplish tasks for which it is completely ineffective. It is only sensible to choose a communication medium which best suits the needs of the task at hand. For example, if you want to correct your subordinate on a mistake, meet him/her instead of sending an email; if you’d like to explain a complicated procedure to someone, demonstrate it; if you’re trying to solve someone’s problem, call them. Knowing how and when to use email sets managers and leaders apart in organisations.

The quantity of emails is also multiplied by the number of times an email is replied to. At my previous workplace we had a rule that if any email continues for more than two email chains, both the sender and recipient should meet each other and discuss the matter. Email is best used for simple and short communication. Longer emails can be drafted when already-discussed matters need to be documented.

The way you communicate by email speaks volumes about your personality. If you are courteous in real life, you’ll be the same when composing emails. Unlike face-to-face communication, where a lot can be conveyed by body language, in emails, tone and inflection are hard to decipher. Words? and phrases which may be appropriate in a face-to-face conversation, such as, “Why did you…” “You must…” and “I don’t understand your…” trigger a defense mechanism in recipients and should be avoided in emails. On the other hand, the same message can have a more poitive impact with the addition of courteous words such as “dear”, “thank you”, “regards” etc.

Attention-seeking behaviour is evident in persistent “reply all” users. Many participants at my workshops have said that when they disseminate information to users, they feel important and useful. However, if the reply is not required by all recipients, it wastes their time and clogs their inbox. The constant “new email” notification acts as a distracter.

Where efficiency is great, it should certainly be paired with effectiveness. Many of you who thrive on speed would recall a message which was intended for Asim Zaheer but was sent to Asif Zaheer. While address books have taken a load off our memory, its usage demands constant vigilance. Similarly, sending out an email with grammatical errors can create an impression of carelessness and irresponsibility. Double checking the address list and running a spell check before sending an email doesn’t consume a lot of time but will surely save you from unnecessary embarrassment.

Effectiveness also needs to be coupled with efficiency. Delaying a response with the intent to revert with complete information can be avoided by simply acknowledging the email. It is okay to write “Thank you for your email. I will get back to you on June, XYZ.” The sooner you reply to an email, the less the clutter in your inbox — allowing you to focus on other tasks. The oftneglected subject line can actually facilitate in getting a timely response if the purpose, along with deadline (if any), is mentioned in crisp and meaningful words.

Like a decent conversation, a well-written email also needs strcture. Greeting the individual and introducing oneself (if needed) in the opening, communicating the purpose along with two to four bullet points in the body of the email, specifying the deadline (if any) along with offering assistance in the closing paragraph has always worked for me. Often we miss out on offering help by not writing statements like “Feel free to contact me for any clarification” or “Do let me know if you need more detail.” This depicts lack of ownership on the part of the sender.

Today, life without email is hard to imagine. However, the presence of one medium should not detract from the rest. What you need to accomplish should always be kept in mind before choosing the medium. Email is as much a projection of your professional image as any other written or verbal presentation and must be handled thoughtfully. Sustainable improvement in your emails is possible only by improving your personality and the way you communicate in general.

Published in The Express Tribune, November 7^th, 2010.

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