...Positive Outlook: The ratings reflect Costco Wholesale Corporation's (Costco) strong competitive position, healthy operating performance, ample FCF and liquidity and conservative balance sheet, with adjusted debt/EBITDAR of around 1.5x. The Positive Outlook reflects the potential for leverage to improve to the low-1x range over the next year if the company repays the $1.2 billion of notes that mature in December 2015 with cash. Focused Merchandising Strategy: Costco benefits from a focused merchandising strategy, with only 3,700 fast-turning products per warehouse and limited pricing markups, resulting in a loyal customer base and highly productive warehouses that generate, on average, more than $164 million in revenues annually. High-frequency categories account for a significant percentage of sales, with 56% of sales from food and sundries, and 17% from ancillary businesses, which include traffic-drivers such as gas stations and pharmacies. Strong Sales and Steady Margins: These factors...
