My dueling partner Ryan Fuhrmann has made many good points in his argument. I can see why some people might be concerned about whether Costco
I see a great business for the long term, and he sees a company that might face some growth challenges in the near future. However, I might add, the Fool community is on my side here -- as of this writing, Costco has a four-star rating in CAPS, beating out two-star Wal-Mart
As I pointed out in my opening argument, Costco has many things going for it -- and I didn't even mention its formidable cash reserve. With $2.83 billion in cash and just $215 million in long-term debt, Costco is in a pretty sweet position; many companies, in fact, would envy its balance sheet. Although debt isn't always a detriment, there's something to be said for a retailer that has been able to grow without heavy borrowing -- or high operating lease expenses, for that matter. And while Costco's cash has dipped a bit, it's been using it to buy back shares.
Despite Ryan's concerns about growth, I think Costco's horizon is very promising. As I said in my opener, this year Costco opened 27 warehouses after opening just 19 the year before, and it's planning 35 for fiscal 2007, plus two in Mexico. It's stepping up the pace significantly with 40 more stores planned for fiscal 2008. That means there's plenty of room for growth, and Costco will be seizing the opportunity over the next several years. As for a more challenging competitive environment as Costco expands still more, well, somehow I don't see BJ's or Sam's Club gaining the cachet that Costco has built around its brand.
Paying too high a price for a stock that can't keep delivering growth for the long haul is always a concern. However, when an investor waits and waits for the "perfect" (i.e., "cheap") price for shares of a well-run, profitable, excellent company like Costco (here nominated for the best blue chip for 2007), let's just say the opportunities to buy and hold for the long term may be few and far between. With the future so bright -- and the company so well run, so successful, and so focused on long-term success over the course of its history, let's not underestimate Costco.
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