Costco rarely does anything revolutionary.
Aside from being a leader in the membership-based retail club model, alongside Walmart's Sam's Club, the retailer never pushes boundaries when it comes to technology.
Costco (COST) -) waits for rivals like Amazon, Walmart, and Target to invent things, test them with consumers, and then cherry-picks the ideas that will work for its members. It's a plodding strategy that has left the warehouse club far behind its rivals when it comes to the digital side of its business.
Related: Target gives an old-school gift to customers this holiday season
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 to not invest in bells and whistles. The chain offers no-frill shopping but has added things like digital delivery via Instacart because they bring value to members.
As a company, Costco treats its capital very carefully. This is not a company flying executives on junkets or wining and dining the media 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's 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 would happen for over a year.
Image source: Patrick T. FALLON / AFP) (Photo by PATRICK T. FALLON/AFP via Getty Images
Costco pays its fifth special dividend
Costco, like many companies, pays shareholders a quarterly dividend. That's a cash payment to people who own its stock to essentially pay them for being part owner of the company.
Four times in its history Costco has offered a special dividend. That's an extra payment that happens when the board of directors decides it should.
"We've done four specials. And as one of the board members said, we are a little quirky and it seems to have worked for us. So it's certainly an arrow in our quiver, but we haven't made any decision at this point," Galanti said during an earnings call last year.
He has been hinting the retailer would offer another one since the warehouse club's first-quarter earnings call in December 2022.
Now, the board of directors has approved a fifth special dividend and it's not a small amount.
"The Board of Directors has declared a special cash dividend on Costco common stock of $15 per share, payable January 12, 2024, to shareholders of record as of the close of business on December 28, 2023. The aggregate 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 massive business. In Q1 the company reported net sales of $56.72 billion, an increase of 6.1% from $53.44 billion for the first quarter of fiscal year 2023, ended Nov. 20, 2022.
Its profits from operations improved as well. 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 take its cash down to just over $11 billion. Costco had about $5 billion in operating costs for Q1 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 at the same time last year when the company faced supply chain disruptions and a difficult-to-predict holiday season coming off of the covid pandemic.
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