405573___CLEANLPDF_LAN_02Dec202214400840

FISCAL YEAR ENDED AUGUST 28, 2022

ANNUAL REPORT

2022

December 7, 2022

Dear Costco Shareholders,

Through the years, Costco’s mission has stayed the same: providing our members with quality goods and services at the

lowest prices. We follow our Code of Ethics of obeying the law, taking care of our members and employees, respecting our

suppliers, and rewarding our shareholders. By staying true to our culture, Costco has continued to succeed, despite the

challenging business environment.

The past year presented many challenges due to inflationary pressures in commodities, labor and transportation. Our buying

staff around the world exhibited diligence and perseverance in developing and executing on strategies to minimize the impact

to both our members and the business. Our business model, including limiting SKU counts, focusing on the most productive

items, and bringing goods to market in high volumes, can not only sustain but provide opportunities in even challenging

circumstances.

We had strong operating results in fiscal 2022. Net sales for the 52-week fiscal year totaled $222.7 billion, an increase of 16%,

with a comparable sales increase of 14%. Net income for the 52-week fiscal year was $5.8 billion, or $13.14 per diluted share,

an increase of 17%. Revenue from membership fees increased 9% to $4.2 billion.

With the slowing of the pandemic, we were able to increase the pace of opening warehouses and business centers

domestically and internationally, including 23 net new locations: 14 in the U.S., two in Canada, and one each in Mexico, Korea,

Japan, Spain, France, Australia and China. Subsequent to the end of fiscal 2022, we expanded our operations to New Zealand

and Sweden. In June 2022, we purchased the equity interest of our Taiwan operations from our former joint venture partner.

Our Kirkland Signature™ brand realized strong global growth in fiscal 2022. As always, we kept our focus on the key priorities

of offering new items, providing cost savings and improving quality. New items included BBQ pellets, women’s jeans,

reformulated dog food, sauté pans, fresh mini cakes and chicken yakisoba.

Our eight e-commerce websites advanced globally with sales growth of 10% in fiscal 2022, on top of a 44% increase the prior

year. The majority of that sales growth is due to items such as furniture, TVs, mattresses, appliances, exercise and patio

equipment, where our expanded big and bulky delivery capacity improved our service and value. Costco continues to focus on

complementing the c ore warehouse business with e-commerce offerings, with expanded selection in home furnishings,

consumer electronics, lawn and garden, health and beauty, apparel and 2-Day Delivery. Costco Next provides members the

option to digitally purchase an expanded selection of products directly from vendors at a great value.

Our employees are the foundation of Costco’s business, the heart of the Company’s culture, and the driver for our success. In

the spirit of acknowledging and rewarding the excellence of our employees, in fiscal 2022, we instituted several wage

increases and provided additional benefits to the majority of our employees.

Costco is continuing work on sustainability initiatives, r eflected in our Sustainability Commitment on Costco.com. These

include continuing progress on our Climate Action Plan, decreasing packaging and plastics use, utilizing recycled content

when available, and being creative in arranging for more products per transport. We have redoubled our efforts related to

diversity and inclusion.

We extend our deepest appreciation to our more than 314,000 Costco employees and all our members worldwide, who are the

heart and soul of our company. Thank you for your continued support and trust in Costco. We wish for good health, happiness,

peace and prosperity for you and your families in the New Year.

Sincerely,

Craig Jelinek

Chief Executive Officer

Ron Vachris

President & COO

Canada

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended August 28, 2022

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

Commission file number 0-20355

Costco Wholesale Corporation

(Exact name of registrant as specified in its charter)

Washington 91-1223280

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer Identification No.)

999 Lake Drive, Issaquah, WA 98027

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (425) 313-8100

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol

Name of each exchange on

which registered

Common Stock, $.005 Par Value COST The NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the

Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the

Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was

required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be

submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for

such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,

a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”

“accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer ☐

Non-accelerated filer

☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition

period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the

Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment

of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15

U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the voting stock held by non-affiliates of the registrant as of February 13, 2022 was

$225,434,477,639.

The number of shares outstanding of the registrant’s common stock as of September 27, 2022, was 442,604,145.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on January 19, 2023,

are incorporated by reference into Part III of this Form 10-K.

COSTCO WHOLESALE CORPORATION

ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED AUGUST 28, 2022

TABLE OF CONTENTS

Page

PART I

Item 1.

Business ................................................................

Item 1A.

Risk Factors .............................................................

Item 1B.

Unresolved Staff Comments ...............................................

Item 2.

Properties ...............................................................

Item 3.

Legal Proceedings ........................................................

Item 4.

Mine Safety Disclosures ...................................................

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer

Purchases of Equity Securities ...........................................

Item 6.

Reserved ................................................................

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of

Operations .............................................................

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk ....................

Item 8.

Financial Statements and Supplementary Data ...............................

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial

Disclosure .............................................................

Item 9A.

Controls and Procedures ..................................................

Item 9B.

Other Information .........................................................

Item 9C.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections ............

PART III

Item 10.

Directors, Executive Officers and Corporate Governance ......................

Item 11.

Executive Compensation ..................................................

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters .....................................................

Item 13.

Certain Relationships and Related Transactions, and Director Independence .....

Item 14.

Principal Accounting Fees and Services .....................................

PART IV

Item 15.

Exhibits, Financial Statement Schedules .....................................

Item 16.

Form 10-K Summary ......................................................

Signatures ...............................................................

INFORMATION RELATING TO FORWARD LOOKING STATEMENTS

Certain statements contained in this document constitute forward-looking statements within the meaning

of the Private Securities Litigation Reform Act of 1995. For these purposes, forward-looking statements

are statements that address activities, events, conditions or developments that the Company expects or

anticipates may occur in the future and may relate to such matters as net sales growth, changes in

comparable sales, cannibalization of existing locations by new openings, price or fee changes, earnings

performance, earnings per share, stock-based compensation expense, warehouse openings and

closures, capital spending, the effect of adopting certain accounting standards, future financial reporting,

financing, margins, return on invested capital, strategic direction, expense controls, membership renewal

rates, shopping frequency, litigation, and the demand for our products and services. In some cases,

forward-looking statements can be identified because they contain words such as “anticipate,” “believe,”

“continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “predict,”

“project,” “seek,” “should,” “target,” “will,” “would,” or similar expressions and the negatives of those terms.

Such forward-looking statements involve risks and uncertainties that may cause actual events, results, or

performance to differ materially from those indicated by such statements, including, without limitation, the

factors set forth in the section titled “Item 1A-Risk Factors”, and other factors noted in the section titled

“Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations” and in

the consolidated financial statements and related notes in Item 8 of this Report. Forward-looking

statements speak only as of the date they are made, and we do not undertake to update these

statements, except as required by law.

PART I

Item 1—Business

Costco Wholesale Corporation and its subsidiaries (Costco or the Company) began operations in 1983, in

Seattle, Washington. We are principally engaged in the operation of membership warehouses in the

United States (U.S.) and Puerto Rico, Canada, Mexico, Japan, United Kingdom (U.K.), Korea, Taiwan,

Australia, Spain, France, China, and Iceland. Costco operated 838, 815, and 795 warehouses worldwide

at August 28, 2022, August 29, 2021, and August 30, 2020, respectively. The Company operates e-

commerce websites in the U.S., Canada, Mexico, U.K., Korea, Taiwan, Japan, and Australia. Our

common stock trades on the NASDAQ Global Select Market, under the symbol “COST.”

We report on a 52/53-week fiscal year, consisting of thirteen four-week periods and ending on the Sunday

nearest the end of August. The first three quarters consist of three periods each, and the fourth quarter

consists of four periods (five weeks in the thirteenth period in a 53-week year). The material seasonal

impact in our operations is increased net sales and earnings during the winter holiday season.

References to 2022, 2021, and 2020 relate to the 52-week fiscal years ended August 28, 2022, August

29, 2021, and August 30, 2020, respectively.

General

We operate membership warehouses and e-commerce websites based on the concept that offering our

members low prices on a limited selection of nationally-branded and private-label products in a wide

range of categories will produce high sales volumes and rapid inventory turnover. When combined with

the operating efficiencies achieved by volume purchasing, efficient distribution and reduced handling of

merchandise in no-frills, self-service warehouse facilities, these volumes and turnover enable us to

operate profitably at significantly lower gross margins (net sales less merchandise costs) than most other

retailers. We often sell inventory before we are required to pay for it, even while taking advantage of early

payment discounts.

We buy most of our merchandise directly from manufacturers and route it to cross-docking consolidation

points (depots) or directly to our warehouses. Our depots receive large shipments from manufacturers

and quickly ship these goods to warehouses. This process creates freight volume and handling

efficiencies, lowering costs associated with traditional multiple-step distribution channels. For our e-

commerce operations we ship merchandise through our depots, our logistics operations for big and bulky

items, as well as through drop-ship and other delivery arrangements with our suppliers.

Our average warehouse space is approximately 146,000 square feet, with newer units being slightly

larger. Floor plans are designed for economy and efficiency in the use of selling space, the handling of

merchandise, and the control of inventory. Because shoppers are attracted principally by the quality of

merchandise and low prices, our warehouses are not elaborate. By strictly controlling the entrances and

exits and using a membership format, we believe our inventory losses (shrinkage) are well below those of

typical retail operations.

Our warehouses on average operate on a seven-day, 70-hour week. Gasoline operations generally have

extended hours. Because the hours of operation are shorter than many other retailers, and due to other

efficiencies inherent in a warehouse-type operation, labor costs are lower relative to the volume of sales.

Merchandise is generally stored on racks above the sales floor and displayed on pallets containing large

quantities, reducing labor required. In general, with variations by country, our warehouses accept certain

credit cards, including Costco co-branded cards, debit cards, cash and checks, Executive member 2%

reward certificates, co-brand cardholder rebates, and our proprietary stored-value card (shop card).

Our strategy is to provide our members with a broad range of high-quality merchandise at prices we

believe are consistently lower than elsewhere. We seek to limit most items to fast-selling models, sizes,

and colors. We carry less than 4,000 active stock keeping units (SKUs) per warehouse in our core

warehouse business, significantly less than other broadline retailers. We average anywhere from 10,000

to 11,000 SKUs online, some of which are also available in our warehouses. Many consumable products

are offered for sale in case, carton, or multiple-pack quantities only.

In keeping with our policy of member satisfaction, we generally accept returns of merchandise. On certain

electronic items, we typically have a 90-day return policy and provide, free of charge, technical support

services, as well as an extended warranty. Additional third-party warranty coverage is sold on certain

electronic items.

We offer merchandise and services in the following categories:

Core Merchandise Categories (or core business):

• Foods and Sundries (including sundries, dry grocery, candy, cooler, freezer, deli, liquor, and

tobacco)

• Non-Foods (including major appliances, electronics, health and beauty aids, hardware, garden

and patio, sporting goods, tires, toys and seasonal, office supplies, automotive care, postage,

tickets, apparel, small appliances, furniture, domestics, housewares, special order kiosk, and

jewelry)

• Fresh Foods (including meat, produce, service deli, and bakery)

Warehouse Ancillary (includes gasoline, pharmacy, optical, food court, hearing aids, and tire installation)

and Other Businesses (includes e-commerce, business centers, travel, and other)

Warehouse ancillary businesses operate primarily within or next to our warehouses, encouraging

members to shop more frequently. The number of warehouses with gas stations varies significantly by

country, and we have no gasoline business in Korea or China. We operated 668 gas stations at the end of

2022. Net sales for our gasoline business increased to approximately 14% of total net sales in 2022.

Our other businesses sell products and services that complement our warehouse operations (core and

warehouse ancillary businesses). Our e-commerce operations give members convenience and a broader

selection of goods and services. Net sales for e-commerce represented approximately 7% of total net

sales in 2022. This figure does not include other services we offer online in certain countries such as

business delivery, travel, same-day grocery, and various other services. Our business centers carry items

tailored specifically for food services, convenience stores and offices, and offer walk-in shopping and

deliveries. Business centers are included in our total warehouse count. Costco Travel offers vacation

packages, hotels, cruises, and other travel products exclusively for Costco members (offered in the U.S.,

Canada, and the U.K.).

We have direct buying relationships with many producers of brand-name merchandise. We do not obtain

a significant portion of merchandise from any one supplier. The COVID-19 pandemic created

unprecedented supply constraints, including disruptions and delays that have impacted and could

continue to impact the flow and availability of certain products. When sources of supply become

unavailable, we seek alternatives. We also purchase and manufacture private-label merchandise, as long

as quality and member demand are high and the value to our members is significant.

Certain financial information for our segments and geographic areas is included in Note 11 to the

consolidated financial statements included in Item 8 of this Report.

Membership

Our members may utilize their memberships at all of our warehouses and websites. Gold Star

memberships are available to individuals; Business memberships are limited to businesses, including

individuals with a business license, retail sales license, or comparable document. Business members may

add additional cardholders (affiliates), to which the same annual fee applies. Affiliates are not available for

Gold Star members. Our annual fee for these memberships is $60 in the U.S. and varies in other

countries. All paid memberships include a free household card.

Our member renewal rate was 93% in the U.S. and Canada and 90% worldwide at the end of 2022. The

majority of members renew within six months following their renewal date. Our renewal rate, which

excludes affiliates of Business members, is a trailing calculation that captures renewals during the period

seven to eighteen months prior to the reporting date. Our membership counts include active memberships

as well as memberships that have not renewed within the 12 months prior to the reporting date. At the

end of 2020, we standardized our membership count methodology globally to be consistent with the U.S.

and Canada, which resulted in the addition to the count of approximately 2.0 million total cardholders for

2020, of which 1.3 million were paid members. Membership fee income and the renewal rate calculations

were not affected. Our membership was made up of the following (in thousands):

2022 2021 2020

Gold Star ................................................

54,000 50,200 46,800

Business, including affiliates ................................

11,800 11,500 11,300

Total paid members .....................................

65,800 61,700 58,100

Household cards .........................................

53,100 49,900 47,400

Total cardholders .......................................

118,900 111,600 105,500

Paid cardholders (except affiliates) are eligible to upgrade to an Executive membership in the U.S., for an

additional annual fee of $60. Executive memberships are also available in Canada, Mexico, the U.K.,

Japan, Korea, and Taiwan, for which the additional fee varies. Executive members earn a 2% reward on

qualified purchases (generally up to a maximum reward of $1,000 per year), redeemable at Costco

warehouses. This program also offers (except in Mexico and Korea) access to additional savings and

benefits on various business and consumer services, such as auto and home insurance, the Costco auto

purchase program, and check printing. These services are generally provided by third parties and vary by

state and country. Executive members totaled 29.1 million and represented 57% of paid members

(excluding affiliates) in the U.S. and Canada, and 22% of paid members (excluding affiliates) in our Other

International operations. The sales penetration of Executive members represented approximately 71% of

worldwide net sales in 2022.

Human Capital

Our Code of Ethics requires that we “Take Care of Our Employees,” which is fundamental to the

obligation to “Take Care of Our Members.” We must also carefully control our selling, general and

administrative (SG&A) expenses, so that we can sell high quality goods and services at low prices.

Compensation and benefits for employees is our largest expense after the cost of merchandise and is

carefully monitored.

Employee Base

At the end of 2022, we employed 304,000 employees worldwide. The large majority (approximately 95%)

is employed in our membership warehouses and distribution channels, and less than 10% are

represented by unions. We also utilize seasonal employees during peak periods. The total number of

employees by segment is:

Number of Employees

2022 2021 2020

United States ...............................

202,000 192,000 181,000

Canada ....................................

50,000 47,000 46,000

Other International ..........................

52,000 49,000 46,000

Total employees ............................

304,000 288,000 273,000

Growth and Engagement

We believe that our warehouses are among the most productive in the retail industry, owing in substantial

part to the commitment and efficiency of our employees. We seek to provide them not merely with

employment but careers. Many attributes of our business contribute to the objective; the more significant

include: competitive c ompensation and benefits for those working in our membership warehouses and

distributions channels; a commitment to promoting from within; and maintaining a ratio of at least 50% of

our employee base being full-time employees. These attributes contribute to what we consider, especially

for the industry, a high retention rate. In 2022, in the U.S. that rate was approximately 90% for employees

who have been with us for at least one year.

Diversity, Equity and Inclusion

The commitment to “Take Care of Our Employees” is also the foundation of our approach to diversity,

equity and inclusion and creating an inclusive and respectful workplace. In 2022, we appointed a new

Chief Diversity and Inclusion Officer. Embracing differences is important to the growth of our Company. It

leads to more opportunities, innovation, and employee satisfaction and connects us to the communities

where we do business.

Well Being

In October 2021, we provided an increase of a minimum of $0.50 per hour for U.S. and Canada wage

scales. In March 2022, we provided certain compensation increases, including a $0.75 per hour increase

to the top of the U.S. wage scales, increased the starting wage to $17.50, and granted our employees

one additional day of paid time off. In July 2022, we provided an additional increase to the top of the U.S.

wage scales of $0.50 per hour. Costco is firmly committed to helping protect the health and safety of our

members and employees and to serving our communities. As the global effect of COVID-19 continues to

evolve, we are closely monitoring the changing situation and complying with public health guidance.

For more detailed information regarding our programs and initiatives, see “Employees” within our

Sustainability Commitment (located on our website). This report and other information on our website are

not incorporated by reference into and do not form any part o f this Annual Report.

Competition

Our industry is highly competitive, based on factors such as price, merchandise quality and selection,

location, convenience, distribution strategy, and customer service. We compete on a worldwide basis with

global, national, and regional wholesalers and retailers, including supermarkets, supercenters, internet

retailers, gasoline stations, hard discounters, department and specialty stores, and operators selling a

single category or narrow range of merchandise. Walmart, Target, Kroger, and Amazon are among our

significant general merchandise retail competitors in the U.S. We also compete with other warehouse

clubs, including Walmart’s Sam’s Club and BJ’s Wholesale Club. Many of the major metropolitan areas in

the U.S. and certain of our Other International locations have multiple competing clubs.

Intellectual Property

We believe that, to varying degrees, our trademarks, trade names, copyrights, proprietary processes,

trade secrets, trade dress, domain names and similar intellectual property add significant value to our

business and are important to our success. We have invested significantly in the development and

protection of our well-recognized brands, including the Costco Wholesale trademarks and our private-

label brand, Kirkland Signature. We believe that Kirkland Signature products are high quality, offered at

prices that are generally lower than national brands, and help lower costs, differentiate our merchandise

offerings, and generally earn higher margins. We expect to continue to increase the sales penetration of

our private-label items.

We rely on trademark and copyright laws, trade-secret protection, and confidentiality, license and other

agreements with our suppliers, employees and others to protect our intellectual property. The availability

and duration of trademark registrations vary by country; however, trademarks are generally valid and may

be renewed indefinitely as long as they are in use and registrations are maintained.

Available Information

Our U.S. website is www.costco.com. We make available through the Investor Relations section of that

site, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports

on Form 8-K, Proxy Statements and Forms 3, 4 and 5, and any amendments to those reports, as soon as

reasonably practicable after filing such materials with or furnishing such documents to the Securities and

Exchange Commission (SEC). The information found on our website is not part of this or any other report

filed with or furnished to the SEC. The SEC maintains a site that contains reports, proxy and information

statements, and other information regarding issuers, such as the Company, that file electronically with the

SEC at www.sec.gov.

We have a code of ethics for senior financial officers, pursuant to Section 406 of the Sarbanes-Oxley Act.

Copies of the code are available free of charge by writing to Secretary, Costco Wholesale Corporation,

999 Lake Drive, Issaquah, WA 98027. If the Company makes any amendments to this code (other than

technical, administrative, or non-substantive amendments) or grants any waivers, including implicit

waivers, to the Chief Executive Officer, Chief Financial Officer or principal accounting officer and

controller, we will disclose (on our website or in a Form 8-K report filed with the SEC) the nature of the

amendment or waiver, its effective date, and to whom it applies.

Information about our Executive Officers

The executive officers of Costco, their position, and ages are listed below. All have over 25 years of

service with the Company, with the exception of Mr. Sullivan who has 21 years of service.

Name Position

Executive

Officer

Since Age

W. Craig Jelinek ............ Chief Executive Officer. Mr. Jelinek has been a director since

February 2010. Mr. Jelinek previously was President and

CEO from January 2012 to February 2022. He was

President and Chief Operating Officer from February 2010 to

December 2011. Prior to that he was Executive Vice

President, Chief Operating Officer, Merchandising since

2004.

1995 70

Ron M. Vachris ............. President and Chief Operating Officer. Mr. Vachris has been

a director since February 2022. Mr. Vachris previously

served as Executive Vice President of Merchandising from

June 2016 to January 2022, as Senior Vice President, Real

Estate Development, from August 2015 to June 2016, and

Senior Vice President, General Manager, Northwest Region,

from 2010 to July 2015.

2016 57

Richard A. Galanti .......... Executive Vice President and Chief Financial Officer.

Mr. Galanti has been a director since January 1995.

1993 66

Jim C. Klauer .............. Executive Vice President, Chief Operating Officer, Northern

Division. Mr. Klauer was Senior Vice President, Non-Foods

and E-commerce Merchandise, from 2013 to January 2018.

2018 60

Patrick J. Callans ........... Executive Vice President, Administration. Mr. Callans was

Senior Vice President, Human Resources and Risk

Management, from 2013 to December 2018.

2019 60

Russ D. Miller .............. Senior Executive Vice President, U.S. Operations. Mr. Miller

was Executive Vice President, Chief Operating Officer,

Southern Division and Mexico, from January 2018 to May

2022. Mr. Miller was Senior Vice President, Western Canada

Region, from 2001 to January 2018.

2018 65

James P. Murphy ........... Executive Vice President, Chief Operating Officer,

International Division. Mr. Murphy was Senior Vice

President, International, from 2004 to October 2010. Mr.

Murphy is retiring from the Company at the end of calendar

year 2022.

2011 69

Timothy L. Rose ............ Executive Vice President, Ancillary Businesses,

Manufacturing, and Business Centers. Mr. Rose was Senior

Vice President, Merchandising, Foods and Sundries and

Private Label, from 1995 to December 2012. Mr. Rose is

retiring from the Company effective November, 2022.

2013 70

Yoram B. Rubanenko ....... Executive Vice President, Chief Operating Officer, Eastern

Division. Mr. Rubanenko was Senior Vice President and

General Manager, Southeast Region, from 2013 to

September 2021, and Vice President, Regional Operations

Manager for the Northeast Region, from 1998 to 2013.

2021 58

John Sullivan .............. Executive Vice President, General Counsel & Corporate

Secretary. Mr. Sullivan has been General Counsel since

2016 and Corporate Secretary since 2010.

2021 62

Claudine E. Adamo ......... Executive Vice President, Merchandising. Ms. Adamo was

Senior Vice President, Non Foods, from 2018 to February

2022, and Vice President, Non Foods, from 2013 to 2018.

2022 52

Caton Frates ............... Executive Vice President, Chief Operating Officer, Southwest

Division. Mr. Frates was Senior Vice President, Los Angeles

Division, from 2015 to May 2022.

2022 54

Pierre Riel ................. Executive Vice President, Chief Operating Officer,

International Division. Mr. Riel was Senior Vice President,

Country Manager, Canada, from 2019 to March 2022, and

Senior Vice President, Eastern Canada Region, from 2001 to

2019.

2022 59

Item 1A—Risk Factors

The risks described below could materially and adversely affect our business, financial condition and

results of operations. We could also be affected by additional risks that apply to all companies operating

in the U.S. and globally, as well as other risks that are not presently known to us or that we currently

consider to be immaterial. These Risk Factors should be carefully reviewed in conjunction with

Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7 and

our consolidated financial statements and related notes in Item 8 of this Report.

Business and Operating Risks

We are highly dependent on the f inancial performance of our U.S. and Canadian operations.

Our financial and operational performance is highly dependent on our U.S. and Canadian operations,

which comprised 87% and 85% of net sales and operating income in 2022, respectively. Within the U.S.,

we are highly dependent on our California operations, which comprised 28% of U.S. net sales in 2022.

Our California market, in general, has a larger percentage of higher volume warehouses as compared to

our other domestic markets. Any substantial slowing or sustained decline in these operations could

materially adversely affect our business and financial results. Declines in financial performance of our

U.S. operations, particularly in California, and our Canadian operations could arise from, among other

things: slow growth or declines in comparable warehouse sales (comparable sales); negative trends in

operating expenses, including increased labor, healthcare and energy costs; failing to meet targets for

warehouse openings; cannibalizing existing locations with new warehouses; shifts in sales mix toward

lower gross margin products; changes or uncertainties in economic conditions in our markets, including

higher levels of unemployment and depressed home values; and failing to consistently provide high

quality and innovative new products.

We may be unsuccessful implementing our growth strategy, including expanding our business in

existing markets and new markets, and integrating acquisitions, which could have an adverse

impact on our business, financial condition and results of operations.

Our growth is dependent, in part, on our ability to acquire property and build or lease new warehouses

and depots. We compete with other retailers and businesses for suitable locations. Local land use and

other regulations restricting the construction and operation of our warehouses and depots, as well as local

community actions opposed to the location of our warehouses or depots at specific sites and the adoption

of local laws restricting our operations and environmental regulations, may impact our ability to find

suitable locations and increase the cost of sites and of constructing, leasing and operating warehouses

and depots. We also may have difficulty negotiating leases or purchase agreements on acceptable terms.

In addition, certain jurisdictions have enacted or proposed laws and regulations that would prevent or

restrict the operation or expansion plans of certain large retailers and warehouse clubs, including us.

Failure to effectively manage these and other similar factors may affect our ability to timely build or lease

and operate new warehouses and depots, which could have a material adverse effect on our future

growth and profitability.

We seek to expand in existing markets to attain a greater overall market share. A new warehouse may

draw members away from our existing warehouses and adversely affect their comparable sales

performance, member traffic, and profitability.

We intend to continue to open warehouses in new markets. Associated risks include difficulties in

attracting members due to a lack of familiarity with us, attracting members of other wholesale club

operators, our lesser familiarity with local member preferences, and seasonal differences in the market.

Entry into new markets may bring us into competition with new competitors or with existing competitors

with a large, established market presence. We cannot ensure that new warehouses and new e-commerce

websites will be profitable and future profitability could be delayed or otherwise materially adversely

affected.

We have made and may continue to make investments and acquisitions to improve the speed, accuracy

and efficiency of our supply chains and delivery channels. The effectiveness of these investments can be

less predictable than opening new locations and might not provide the anticipated benefits or desired

rates of return.

Our failure to maintain membership growth, loyalty and brand recognition could adversely affect

our results of operations.

Membership loyalty and growth are essential to our business. The extent to which we achieve growth in

our membership base, increase the penetration of Executive membership, and sustain high renewal rates

materially influences our profitability. Damage to our brands or reputation may negatively impact

comparable sales, diminish member trust, and reduce renewal rates and, accordingly, net sales and

membership fee revenue, negatively impacting our results of operations.

We sell many products under our Kirkland Signature brand. Maintaining consistent product quality,

competitive pricing, and availability of these products is essential to developing and maintaining member

loyalty. These products also generally carry higher margins than national brand products and represent a

growing portion of our overall sales. If the Kirkland Signature brand experiences a loss of member

acceptance or confidence, our sales and gross margin results could be adversely affected.

Disruptions in merchandise distribution or processing, packaging, manufacturing, and other

facilities could adversely affect sales and member satisfaction.

We depend on the orderly operation of the merchandise receiving and distribution process, primarily

through our depots. We also rely upon processing, packaging, manufacturing and other facilities to

support our business, which includes the production of certain private-label items. Although we believe

that our operations are efficient, disruptions due to fires, tornadoes, hurricanes, earthquakes, pandemics

or other extreme weather conditions or catastrophic events, labor issues or other shipping problems may

result in delays in the production and delivery of merchandise to our warehouses, which could adversely

affect sales and the satisfaction of our members. Our e-commerce operations depend heavily on third-

party and in-house logistics providers and is negatively affected when these providers are unable to

provide services in a timely fashion.

We may not timely identify or effectively respond to consumer trends, which could negatively

affect our relationship with our members, the demand for our products and services, and our

market share.

It is difficult to consistently and successfully predict the products and services that our members will

desire. Our success depends, in part, on our ability to identify and respond to trends in demographics and

consumer preferences. Failure to identify timely or effectively respond to changing consumer tastes,

preferences (including those relating to environmental, social and governance practices) and spending

patterns could negatively affect our relationship with our members, the demand for our products and

services, and our market share. If we are not successful at predicting our sales trends and adjusting our

purchases accordingly, we may have excess inventory, which could result in additional markdowns, or we

may experience out-of-stock positions and delivery delays, which could result in higher costs, both of

which would reduce our operating performance. This could have an adverse effect on net sales, gross

margin and operating income.

Availability and performance of our information technology (IT) systems are vital to our business.

Failure to successfully execute IT projects and have IT systems available to our business would

adversely impact our operations.

IT systems play a crucial role in conducting our business. These systems are utilized to process a very

high volume of transactions, conduct payment transactions, track and value our inventory and produce

reports critical for making business decisions. Failure or disruption of these systems could have an

adverse impact on our ability to buy products and services from our suppliers, produce goods in our

manufacturing plants, move the products in an efficient manner to our warehouses and sell products to

our members. We are undertaking large technology and IT transformation projects. The failure of these

projects could adversely impact our business plans and potentially impair our day to day business

operations. Given the high volume of transactions we process, it is important that we build strong digital

resiliency to prevent disruption from events such as power outages, computer and telecommunications

failures, viruses, internal or external security breaches, errors by employees, and catastrophic events

such as fires, earthquakes, tornadoes and hurricanes. Any debilitating failure of our critical IT systems,

data centers and backup systems would require significant investments in resources to restore IT

services and may cause serious impairment in our business operations including loss of business

services, increased cost of moving merchandise and failure to provide service to our members. We are

currently making substantial investments in maintaining and enhancing our digital resiliency and failure or

delay in these projects could be costly and harmful to our business. Failure to deliver IT transformation

efforts efficiently and effectively could result in the loss of our competitive position and adversely impact

our financial condition and results of operations.

We are required to maintain the privacy and security of personal and business information amidst

multiplying threat landscapes and in compliance with privacy and data protection regulations

globally. Failure to do so could damage our business, including our reputation with members,

suppliers and employees, cause us to incur substantial additional costs, and become subject to

litigation and regulatory action.

Increased security threats and more sophisticated cyber misconduct pose a risk to our systems,

networks, products and services. We rely upon IT systems and networks, some of which are managed by

third parties, in connection with virtually all of our business activities. Additionally, we collect, store and

process sensitive information relating to our business, members, suppliers and employees. Operating

these IT systems and networks, and processing and maintaining this data, in a secure manner, is critical

to our business operations and strategy. Increased remote work has also increased the possible attack

surfaces. Threats designed to gain unauthorized access to systems, networks and data, both ours and

third parties with whom we work, are increasing in frequency and sophistication. Cybersecurity attacks

may r ange from random attempts to coordinated and targeted attacks, including sophisticated computer

crimes and advanced persistent threats. Phishing attacks have emerged as particularly prominent,

including as vectors for ransomware attacks, which have increased in breadth and frequency. While we

train our employees as part of our security efforts, that training cannot be completely effective. These

threats pose a risk to the security of our systems and networks and the confidentiality, integrity, and

availability of our data. It is possible that our IT systems and networks, or those managed by third parties

such as cloud providers or suppliers that otherwise host confidential information, could have

vulnerabilities, which could go unnoticed for a period of time. While our cybersecurity and compliance

efforts seek to mitigate such risks, there can be no guarantee that the actions and controls we and our

third-party service providers have implemented and are implementing, will be sufficient to protect our

systems, information or other property.

The potential impacts of a material cybersecurity attack include reputational damage, litigation,

government enforcement actions, penalties, disruption to systems, unauthorized release of confidential or

otherwise protected information, corruption of data, diminution in the value of our investment in IT

systems and increased cybersecurity protection and remediation costs. This could adversely affect our

competitiveness, results of operations and financial condition and, critically in light of our business model,

loss of member confidence. Further, the insurance coverage we maintain and indemnification

arrangements with third-parties may be inadequate to cover claims, costs, and liabilities relating to

cybersecurity incidents. In addition, data we collect, store and process is subject to a variety of U.S. and

international laws and regulations, such as the European Union's General Data Protection Regulation,

California Consumer Privacy Act, Health Insurance Portability and Accountability Act, and other privacy

and cybersecurity laws across the various states and around the globe, which may carry significant

potential penalties for noncompliance.

We are subject to payment-related risks.

We accept payments using a variety of methods, including select credit and debit cards, cash and checks,

co-brand cardholder rebates, Executive member 2% reward certificates, and our shop card. As we offer

new payment options to our members, we may be subject to additional rules, regulations, compliance

requirements, and higher fraud losses. For certain payment methods, we pay interchange and other

related acceptance fees, along with additional transaction processing fees. We rely on third parties to

provide payment transaction processing services for credit and debit cards and our shop card. It could

disrupt our business if these parties become unwilling or unable to provide these services to us. We are

also subject to fee increases by these service providers.

We must comply with evolving payment card association and network operating rules, including data

security rules, certification requirements and rules governing electronic funds transfers. For example, we

are subject to Payment Card Industry Data Security Standards, which contain compliance guidelines and

standards with regard to our security surrounding the physical and electronic storage, processing and

transmission of individual cardholder data. If our internal systems are breached or compromised, we may

be liable for card re-issuance costs, subject to fines and higher transaction fees and lose our ability to

accept card payments from our members, and our business and operating results could be adversely

affected.

We might sell products that cause illness or injury to our members, harm to our reputation, and

expose us to litigation.

If our merchandise, including food and prepared food products for human consumption, drugs, children's

products, pet products and durable goods, do not meet or are perceived not to meet applicable safety or

labeling standards or our members' expectations, we could experience lost sales, increased costs,

litigation or reputational harm. The sale of these items involves the risk of illness or injury to our members.

Such illnesses or injuries could result from tampering by unauthorized third parties, product contamination

or spoilage, including the presence of foreign objects, substances, chemicals, other agents, or residues

introduced during the growing, manufacturing, storage, handling and transportation phases, or faulty

design. Our suppliers are generally contractually required to comply with product safety laws, and we are

dependent on them to ensure that the products we buy comply with safety and other standards. While we

are subject to governmental inspection and regulations and work to comply in all material respects with

applicable laws and regulations, we cannot be sure that consumption or use of our products will not cause

illness or injury or that we will not be subject to claims, lawsuits, or government investigations relating to

such matters, resulting in costly product recalls and other liabilities that could adversely affect our

business and results of operations. Even if a product liability claim is unsuccessful or is not fully pursued,

negative publicity could adversely affect our reputation with existing and potential members and our

corporate and brand image, and these effects could be long-term.

If we do not successfully develop and maintain a relevant omnichannel experience for our

members, our results of operations could be adversely impacted.

Omnichannel retailing is rapidly evolving, and we must keep pace with changing member expectations

and new developments by our competitors. Our members are increasingly using mobile phones, tablets,

computers, and other devices to shop and to interact with us through social media. We are making

investments in our websites and mobile applications. If we are unable to make, improve, or develop

relevant member-facing technology in a timely manner, our ability to compete and our results of

operations could be adversely affected.

Inability to attract, train and retain highly qualified employees could adversely impact our

business, financial condition and results of operations.

Our success depends on the continued contributions of our employees, including members of our senior

management and other key operations, IT, merchandising and administrative personnel. Failure to identify

and implement a succession plan for senior management could negatively impact our business. We must

attract, train and retain a large and growing number of qualified employees, while controlling related labor

costs and maintaining our core values. Our ability to control labor and benefit costs is subject to

numerous internal and external factors, including the continuing impacts of the pandemic, regulatory

changes, prevailing wage rates, union relations and healthcare and other insurance costs. We compete

with other retail and non-retail businesses for these employees and invest significant resources in training

and motivating them. There is no assurance that we will be able to attract or retain highly qualified

employees in the future, which could have a material adverse effect on our business, financial condition

and results of operations.

We may incur property, casualty or other losses not covered by our insurance.

Claims for employee health care benefits, workers’ compensation, general liability, property damage,

directors’ and officers’ liability, vehicle liability, inventory loss, and other exposures are funded

predominantly through self-insurance. Insurance coverage is maintained for certain risks to limit

exposures arising from very large losses. The types and amounts of insurance may vary from time to time

based on our decisions with respect to risk retention and regulatory requirements. Significant claims or

events, regulatory changes, a substantial rise in costs of health care or costs to maintain our insurance or

the failure to maintain adequate insurance coverage could have an adverse impact on our financial

condition and results of operations.

Although we maintain specific coverages for catastrophic property losses, we still bear a significant

portion of the risk of losses incurred as a result of any physical damage to, or the destruction of, any

warehouses, depots, manufacturing or home office facilities, loss or spoilage of inventory, and business

interruption. Such losses could materially impact our cash flows and results of operations.

Market and Other External Risks

We face strong competition from other retailers and warehouse club operators, which could

adversely affect our business, financial condition and results of operations.

The retail business is highly competitive. We compete for members, employees, sites, products and

services and in other important respects with a wide range of local, regional and national wholesalers and

retailers, both in the United States and in foreign countries, including other warehouse-club operators,

supermarkets, supercenters, internet retailers, gasoline stations, hard discounters, department and

specialty stores and operators selling a single category or narrow range of merchandise. Such retailers

and warehouse club operators compete in a variety of ways, including pricing, selection and availability,

services, location, convenience, store hours, and the attractiveness and ease of use of websites and

mobile applications. The evolution of retailing in online and mobile channels has improved the ability of

customers to comparison shop, which has enhanced competition. Some competitors have greater

financial resources and technology capabilities, better access to merchandise, and greater market

penetration than we do. Our inability to respond effectively to competitive pressures, changes in the retail

markets or customer expectations could result in lost m arket share and negatively affect our financial

results.

General economic factors, domestically and internationally, may adversely affect our business,

financial condition, and results of operations.

Higher energy and gasoline costs, inflation, levels of unemployment, healthcare costs, consumer debt

levels, foreign-currency exchange rates, unsettled financial markets, weaknesses in housing and real

estate markets, reduced consumer confidence, changes and uncertainties related to government fiscal

and tax policies including changes in tax rates, duties, tariffs, or other restrictions, sovereign debt crises,

pandemics and other health crises, and other economic factors could adversely affect demand for our

products and services, require a change in product mix, or impact the cost of or ability to purchase

inventory. Additionally, actions in various countries, particularly China and the United States, have

affected the costs of some of our merchandise. The degree of our exposure is dependent on (among

other things) the type of goods, rates imposed, and timing of the tariffs. The impact to our net sales and

gross margin is influenced in part by our merchandising and pricing strategies in response to potential

cost increases. Higher tariffs could adversely impact our results.

Prices of certain commodities, including gasoline and consumable goods used in manufacturing and our

warehouse retail operations, are historically volatile and are subject to fluctuations arising from changes in

domestic and international supply and demand, inflationary pressures, labor costs, competition, market

speculation, government regulations, taxes and periodic delays in delivery. Rapid and significant changes

in commodity prices and our ability and desire to pass them through to our members may affect our sales

and profit margins. These factors could also increase our merchandise costs and selling, general and

administrative expenses, and otherwise adversely affect our operations and financial results. General

economic conditions can also be affected by events like the outbreak of hostilities, including but not

limited to the Ukraine conflict, or acts of terrorism.

Inflationary factors such as increases in merchandise costs may adversely affect our business, financial

condition and results of operations. If inflation on merchandise increases beyond our ability to control we

may not be able to adjust prices to sufficiently offset the effect of the various cost increases without

negatively impacting consumer demand. Certain merchandise categories were impacted by inflation

higher than what we have experienced in recent years due to, among other things, the continuing impacts

of the pandemic and uncertain economic environment.

Suppliers may be unable to timely supply us with quality merchandise at competitive prices or

may fail to adhere to our high standards, resulting in adverse effects on our business,

merchandise inventories, sales, and profit margins.

We depend heavily on our ability to purchase quality merchandise in sufficient quantities at competitive

prices. As the quantities we require continue to grow, we have no assurances of continued supply,

appropriate pricing or access to new products, and any supplier has the ability to change the terms upon

which they sell to us or discontinue selling to us. Member demands may lead to out-of-stock positions

causing a loss of sales and profits.

We buy from numerous domestic and foreign manufacturers and importers. Our inability to acquire

suitable merchandise on acceptable terms or the loss of key suppliers could negatively affect us. We may

not be able to develop relationships with new suppliers, and products from alternative sources, if any, may

be of a lesser quality or more expensive. Because of our efforts to adhere to high quality standards for

which available supply may be limited, particularly for certain food items, the large volumes we demand

may not be consistently available.

Our suppliers (and those they depend upon for materials and services) are subject to risks, including

labor disputes, union organizing activities, financial liquidity, natural disasters, extreme weather

conditions, public health emergencies, supply constraints and general economic and political conditions

that could limit their ability to timely provide us with acceptable merchandise. One or more of our suppliers

might not adhere to our quality control, packaging, legal, regulatory, labor, environmental or animal

welfare standards. These deficiencies may delay or preclude delivery of merchandise to us and might not

be identified before we sell such merchandise to our members. This failure could lead to recalls and

litigation and otherwise damage our reputation and our brands, increase costs, and otherwise adversely

impact our business.

Fluctuations in foreign exchange rates may adversely affect our results of operations.

During 2022, our international operations, including Canada, generated 27% and 32% of our net sales

and operating income, respectively. Our international operations have accounted for an increasing portion

of our warehouses, and we plan to continue international growth. To prepare our consolidated financial

statements, we translate the financial statements of our international operations from local currencies into

U.S. dollars using current exchange rates. Future fluctuations in exchange rates that are unfavorable to

us may adversely affect the financial performance of our Canadian and Other International operations and

have a corresponding adverse period-over-period effect on our results of operations. As we continue to

expand internationally, our exposure to fluctuations in foreign exchange rates may increase.

A portion of the products we purchase is paid for in a currency other than the local currency of the country

in which the goods are sold. Currency fluctuations may increase our merchandise costs and may not be

passed on to members. Consequently, fluctuations in currency exchange rates may adversely affect our

results of operations.

Natural disasters, extreme weather conditions, public health emergencies or other catastrophic

events could negatively affect our business, financial condition, and results of operations.

Natural disasters and extreme weather conditions, including those impacted by climate change, such as

hurricanes, typhoons, floods, earthquakes, wildfires, droughts; acts of terrorism or violence, including

active shooter situations; energy shortages; public health issues, including pandemics and quarantines,

particularly in California or Washington state, where our centralized operating systems and administrative

personnel are located, could negatively affect our operations and financial performance. Such events

could result in physical damage to our properties, limitations on store operating hours, less frequent visits

by members to physical locations, the temporary closure of warehouses, depots, manufacturing or home

office facilities, the temporary lack of an adequate work force, disruptions to our IT systems, the

temporary or long-term disruption in the supply of products from some local or overseas suppliers, the

temporary disruption in the transport of goods to or from overseas, delays in the delivery of goods to our

warehouses or depots, and the temporary reduction in the availability of products in our warehouses.

Public health issues, whether occurring in the U.S. or abroad, could disrupt our operations, disrupt the

operations of suppliers or members, or have an adverse impact on consumer spending and confidence

levels. These events c ould also reduce demand for our products or make it difficult or impossible to

procure products. We may be required to suspend operations in some or all of our locations, which could

have a material adverse effect on our business, financial condition and results of operations.

The COVID-19 pandemic continues to affect our business, financial condition and results of

operations in many respects.

The continuing impacts of the COVID-19 pandemic are highly unpredictable and volatile and are affecting

certain business operations, demand for our products and services, in-stock positions, costs of doing

business, availability of labor, access to inventory, supply chain operations, our ability to predict future

performance, exposure to litigation, and our financial performance, among other things.

Other factors and uncertainties include, but are not limited to:

• The severity and duration of the pandemic, including future mutations or related variants of the

virus in areas in which we operate;

• Evolving macroeconomic factors, including general economic uncertainty, unemployment rates,

and recessionary pressures;

• Changes in labor markets affecting us and our suppliers;

• Unknown consequences on our business performance and initiatives stemming from the

substantial investment of time and other resources to the pandemic response;

• The pace of recovery when the pandemic subsides;

• The long-term impact of the pandemic on our business, including consumer behaviors; and

• Disruption and volatility within the financial and credit markets.

To the extent that COVID-19 continues to adversely affect the U.S. and global economy, our business,

results of operations, cash flows, or financial condition, it may also heighten other risks described in this

section, including but not limited to those related to consumer behavior and expectations, competition,

brand reputation, implementation of strategic initiatives, cybersecurity threats, payment-related risks,

technology systems disruption, supply chain disruptions, labor availability and cost, litigation, operational

risk as a result of remote work arrangements and regulatory requirements.

Factors associated with climate change could adversely affect our business.

We use natural gas, diesel fuel, gasoline, and electricity in our distribution and warehouse operations.

Government regulations limiting carbon dioxide and other greenhouse gas emissions may increase

compliance and merchandise costs, and other regulation affecting energy inputs could materially affect

our profitability. As the economy transitions to lower carbon intensity we cannot guarantee that we will

make adequate investments or successfully implement strategies that will effectively achieve our climate-

related goals, which could lead to negative perceptions among members and other stakeholders and

result in reputational harm. Climate change, extreme weather conditions, wildfires, droughts and rising

sea levels could affect our ability to procure commodities at costs and in quantities we currently

experience.

We also sell a substantial amount of gasoline, the demand for which could be impacted by concerns

about climate change and increased regulations. More stringent fuel economy standards and public

policies aimed at increasing the adoption of zero-emission and alternative fuel vehicles and other

regulations related to climate change will affect our future operations and may adversely impact our

profitability, and require significant capital expenditures.

Failure to meet financial market expectations could adversely affect the market price and volatility

of our stock.

We believe that the price of our stock currently reflects high market expectations for our future operating

results. Any failure to meet or delay in meeting these expectations, including our warehouse and e-

commerce comparable sales growth rates, membership renewal rates, new member sign-ups, gross

margin, earnings, earnings per share, new warehouse openings, or dividend or stock repurchase policies

could cause the price of our stock to decline.

Legal and Regulatory Risks

We are subject to risks associated with the legislative, judicial, accounting, regulatory, political

and economic factors specific to the countries or regions in which we operate, which c ould

adversely affect our business, financial condition and results of operations.

At the end of 2022, we operated 260 warehouses outside of the U.S., and we plan to continue expanding

our international operations. Future operating results internationally could be negatively affected by a

variety of factors, many similar to those we face in the U.S., certain of which are beyond our control.

These factors include political and economic conditions, regulatory constraints, currency regulations,

policy changes such as the withdrawal of the U.K. from the European Union, and other matters in any of

the countries or regions in which we operate, now or in the future. Other factors that may impact

international operations include foreign trade (including tariffs and trade sanctions), monetary and fiscal

policies and the laws and regulations of the U.S. and foreign governments, agencies and similar

organizations, and risks associated with having major facilities in locations which have been historically

less stable than the U.S. Risks inherent in international operations also include, among others, the costs

and difficulties of managing international operations, adverse tax consequences, and difficulty in enforcing

intellectual property rights.

Changes in accounting standards and subjective assumptions, estimates and judgments by

management related to complex accounting matters could significantly affect our financial

condition and results of operations.

Accounting principles and related pronouncements, implementation guidelines, and interpretations we

apply to a wide range of matters that are relevant to our business, including self-insurance liabilities, are

highly complex and involve subjective assumptions, estimates and judgments by our management.

Changes in rules or interpretation or changes in underlying assumptions, estimates or judgments by our

management could significantly change our reported or expected financial performance and have a

material impact on our consolidated financial statements.

We are exposed to risks relating to evaluations of controls required by Section 404 of the

Sarbanes-Oxley Act.

Section 404 of the Sarbanes-Oxley Act of 2002 requires management assessments of the effectiveness

of internal control over financial reporting and disclosure controls and procedures. If we are unable to

maintain effective internal control over financial reporting or disclosure controls and procedures, our ability

to record, process and report financial information accurately and to prepare financial statements within

required time periods could be adversely affected, which could subject us to litigation or investigations

requiring management resources and payment of legal and other expenses, negatively affect investor

confidence in our financial statements and adversely impact our stock price.

Changes in tax rates, new U.S. or foreign tax legislation, and exposure to additional tax liabilities

could adversely affect our financial condition and results of operations.

We are subject to a variety of taxes and tax collection and remittance obligations in the U.S. and

numerous foreign jurisdictions. Additionally, at any point in time, we may be under examination for value

added, sales-based, payroll, product, import or other non-income taxes. We may recognize additional tax

expense, be subject to additional tax liabilities, or incur losses and penalties, due to changes in laws,

regulations, administrative practices, principles, assessments by authorities and interpretations related to

tax, including tax rules in various jurisdictions. We compute our income tax provision based on enacted

tax rates in the countries in which we operate. As tax rates vary among countries, a change in earnings

attributable to the various jurisdictions in which we operate could result in an unfavorable change in our

overall tax provision. Additionally, changes in the enacted tax rates or adverse outcomes in tax audits,

including transfer pricing disputes, could have a material adverse effect on our financial condition and

results of operations.

Significant changes in or failure to comply with regulations relating to the use, storage, discharge

and disposal of hazardous materials, hazardous and non-hazardous wastes and other

environmental matters could adversely impact our business, financial condition and results of

operations.

We are subject to a wide and increasingly broad array of federal, state, regional, local and international

laws and regulations relating to the use, storage, discharge and disposal of hazardous materials,

hazardous and non-hazardous wastes and other environmental matters. Failure to comply with these

laws could result in harm to our members, employees or others, significant costs to satisfy environmental

compliance, remediation or compensatory requirements, or the imposition of severe penalties or

restrictions on operations by governmental agencies or courts that could adversely affect our business,

financial condition and results of operations.

Operations at our facilities require the treatment and disposal of wastewater, stormwater and agricultural

and food processing wastes, the use and maintenance of refrigeration systems, including ammonia-based

chillers, noise, odor and dust management, the operation of mechanized processing equipment, and

other operations that potentially could affect the environment and public health and safety. Failure to

comply with current and future environmental, health and safety standards could result in the imposition of

fines and penalties, illness or injury of our employees, and claims or lawsuits related to such illnesses or

injuries, and temporary closures or limits on the operations of facilities.

We are involved in a number of legal proceedings and audits and some of these outcomes could

adversely affect our business, financial condition and results of operations.

Our business requires compliance with many laws and regulations. Failure to achieve compliance could

subject us to lawsuits and other proceedings, and lead to damage awards, fines, penalties, and

remediation costs. We are or may become involved in a number of legal proceedings and audits,

including grand jury investigations, government and agency investigations, and consumer, employment,

tort, unclaimed property laws, and other litigation. We cannot predict with certainty the outcomes of these

proceedings and other contingencies, including environmental remediation and other proceedings

commenced by governmental authorities. The outcome of some of these proceedings, audits, unclaimed

property laws, and other contingencies could require us to take, or refrain from taking, actions which could

negatively affect our operations or could require us to pay substantial amounts of money, adversely

affecting our financial condition and results of operations. Additionally, defending against these lawsuits

and proceedings may involve significant expense and diversion of management's attention and

resources.

Item 1B—Unresolved Staff Comments

None.

Item 2—Properties

Warehouse Properties

At August 28, 2022, we operated 838 membership warehouses:

Own Land

and Building

Lease Land

and/or

Building

(1)

Total

United States and Puerto Rico ..................................

466 112 578

Canada ......................................................

90 17 107

Other International .............................................

105 48 153

Total .....................................................

661 177 838

_______________

(1) 126 of the 177 leases are land-only leases, where Costco owns the building.

At the end of 2022, our warehouses contained approximately 122.5 million square feet of operating floor

space: 85.4 million in the U.S.; 15.2 million in Canada; and 21.9 million in Other International. Total

square feet associated with distribution and logistics facilities were approximately 31.0 million.

Additionally, we operate various processing, packaging, manufacturing and other facilities to support our

business, which includes the production of certain private-label items.

Item 3—Legal Proceedings

See discussion of Legal Proceedings in Note 10 to the consolidated financial statements included in

Item 8 of this Report.

Item 4—Mine Safety Disclosures

Not applicable.

PART II

Item 5—Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer

Purchases of Equity Securities

Market Information and Dividend Policy

Our common stock is traded on the NASDAQ Global Select Market under the symbol “COST.” On

September 27, 2022, we had 10,279 stockholders of record.

Payment of dividends is subject to declaration by the Board of Directors. Factors considered in

determining dividends include our profitability and expected capital needs. Subject to these qualifications,

we presently expect to continue to pay dividends on a quarterly basis.

Issuer Purchases of Equity Securities

The following table sets forth information on our common stock repurchase activity for the fourth quarter

of 2022 (dollars in millions, except per share data):

Period

Total Number

of Shares

Purchased

Average Price

Paid per

Total Number of

Purchased as

Part of Publicly

Announced

Program

(1)

Maximum Dollar

Value of Shares

that May Yet be

Purchased under

the Program

May 9—June 5, 2022 ............

98,000 $ 463.77 98,000 $ 2,947

June 6—July 3, 2022 ............

98,000 467.53 98,000 2,901

July 4—July 31, 2022 ............

89,000 512.08 89,000 2,856

August 1—August 28, 2022 .......

88,000 545.08 88,000 2,808

Total fourth quarter ...........

373,000 $ 495.49 373,000

_______________

(1) The repurchase program is conducted under a $4,000 authorization approved by our Board of Directors in April 2019, which

expires in April 2023.

Performance Graph

The following graph compares the cumulative total shareholder return assuming reinvestment of

dividends on an investment of $100 in Costco common stock, S&P 500 Index, and the S&P 500 Retail

Index over the five years from September 3, 2017, through August 28, 2022.

The following graph provides information concerning average sales per warehouse over a 10-year period.

Average Sales Per Warehouse*

(Sales In Millions)

Year Opened # of Whses

2022 23 $ 150

2021 20 $ 140 158

2020 13 $ 132 152 184

2019 20 $ 129 138 172 208

2018 21 $ 116 119 141 172 202

2017 26 $ 121 142 158 176 206 237

2016 29 $ 87 97 118 131 145 173 204

2015 23 $ 83 85 94 112 122 136 163 189

2014 30 $ 108 109 115 125 140 144 155 182 208

2013 & Before 633 $ 160 167 168 167 173 186 193 203 230 261

Totals 838 160 164 162 159 163 176 182 192 217 245

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Fiscal Year

*First year sales annualized.

2017 was a 53-week fiscal year but it has been normalized for purposes of comparability

Item 6—Reserved

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$200.00

$250.00

$300.00

$350.00

$400.00

1/1/2017 1/1/2018 1/1/2019 1/1/2020 1/1/2021 1/1/2022

Dollars

Comparisonof5ͲYea rCumulativeTotalReturnAmongCostcoWholesaleCorporation,

S&P500IndexandS&P500RetailIndex(S5RETL)

CostcoWholesaleCorporation S&P500 S&P500RetailIndex(S5RETL)

Item 7—Management's Discussion and Analysis of Financial Conditions and Results of

Operations (amounts in millions, except per share, share, membership fee, and warehouse count data)

The following Management's Discussion and Analysis of Financial Condition and Results of Operations

(MD&A) is intended to promote understanding of the results of operations and financial condition. MD&A

is provided as a supplement to, and should be read in conjunction with, our consolidated financial

statements and the accompanying Notes to Financial Statements (Part II, Item 8 of this Form 10-K). This

section generally discusses the results of operations for 2022 compared to 2021. For discussion related

to the r esults of operations and changes in financial condition for 2021 compared to 2020 refer to Part II,

Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our

fiscal year 2021 Form 10-K, which was filed with the United States Securities and Exchange Commission

(SEC) on October 6, 2021.

Overview

We believe that the most important driver of our profitability is increasing net sales, particularly

comparable sales. Net sales includes our core merchandise categories (foods and sundries, non-foods,

and fresh foods), warehouse ancillary (gasoline, pharmacy, optical, food court, hearing aids, and tire

installation) and other businesses (e-commerce, business centers, travel and other). We define

comparable sales as net sales from warehouses open for more than one year, including remodels,

relocations and expansions, and sales related to e-commerce websites operating for more than one

year. Comparable sales growth is achieved through increasing shopping frequency from new and existing

members and the amount they spend on each visit (average ticket). Sales comparisons can also be

particularly influenced by certain factors that are beyond our control: fluctuations in currency exchange

rates (with respect to our international operations); inflation and changes in the cost of gasoline and

associated competitive conditions. The higher our comparable sales exclusive of these items, the more

we can leverage our SG&A expenses, reducing them as a percentage of sales and enhancing profitability.

Generating comparable sales growth is foremost a question of making available to our members the right

merchandise at the right prices, a skill that we believe we have repeatedly demonstrated over the long-

term. Another substantial factor in net sales growth is the health of the economies in which we do

business, including the effects of inflation or deflation, especially the United States. Net sales growth and

gross margins are also impacted by our competition, which is vigorous and widespread, across a wide

range of global, national and regional wholesalers and retailers, including those with e-commerce

operations. While we cannot control or reliably predict general economic health or changes in

competition, we believe that we have been successful historically in adapting our business to these

changes, such as through adjustments to our pricing and merchandise mix, including increasing the

penetration of our private-label items, and through online offerings.

Our philosophy is to provide our members with quality goods and services at competitive prices. We do

not focus in the short-term on maximizing prices charged, but instead seek to maintain what we believe is

a perception among our members of our “pricing authority” – consistently providing the most competitive

values. Merchandise costs in 2022 were impacted by inflation higher than what we have experienced in

recent years. The impact to our net sales and gross margin is influenced in part by our merchandising and

pricing strategies in response to cost increases. Those strategies can include, but are not limited to,

working with our suppliers to share in absorbing cost increases, earlier-than-usual purchasing and in

greater volumes, offering seasonal merchandise outside its season, as well as passing cost increases on

to our members. Our investments in merchandise pricing may include reducing prices on merchandise to

drive sales or meet competition and holding prices steady despite cost increases instead of passing the

increases on to our members, all negatively impacting gross margin and gross margin as a percentage of

net sales (gross margin percentage).

We believe our gasoline business enhances traffic in our warehouses, but it generally has a lower gross

margin percentage relative to our non-gasoline business. It also has lower SG&A expenses as a percent

of net sales compared to our non-gasoline business. A higher penetration of gasoline sales will generally

lower our gross margin percentage. Rapidly changing gasoline prices may significantly impact our near-

term net sales growth. Generally, rising gasoline prices benefit net sales growth which, given the higher

sales base, negatively impacts our gross margin percentage but decreases our SG&A expenses as a

percentage of net sales. A decline in gasoline prices has the inverse effect. Additionally, actions in various

countries, particularly China and the United States, have affected the costs of some of our merchandise.

The degree of our exposure is dependent on (among other things) the type of goods, rates imposed, and

timing of the tariffs. Higher tariffs could adversely impact our results.

We also achieve net sales growth by opening new warehouses. As our warehouse base grows, available

and desirable sites become more difficult to secure, and square footage growth becomes a comparatively

less substantial component of growth. The negative aspects of such growth, however, including lower

initial operating profitability relative to existing warehouses and cannibalization of sales at existing

warehouses when openings occur in existing markets, are continuing to decline in significance as they

relate to the results of our total operations. Our rate of square footage growth is generally higher in foreign

markets, due to the smaller base in those markets, and we expect that to continue. Our e-commerce

business growth, domestically and internationally, has also increased our sales but it generally has a

lower gross margin percentage relative to our warehouse operations. E-commerce sales growth slowed in

2022 compared to 2021 and 2020.

The membership format is an integral part of our business and has a significant effect on our profitability.

This format is designed to reinforce member loyalty and provide continuing fee revenue. The extent to

which we achieve growth in our membership base, increase the penetration of our Executive members,

and sustain high renewal rates materially influences our profitability. Our paid membership growth rate

may be adversely impacted when warehouse openings occur in existing markets as compared to new

markets.

Our financial performance depends heavily on controlling costs. While we believe that we have achieved

successes in this area, some significant costs are partially outside our control, particularly health care and

utility expenses. With respect to the compensation of our employees, our philosophy is not to seek to

minimize their wages and benefits. Rather, we believe that achieving our longer-term objectives of

reducing employee turnover and enhancing employee satisfaction requires maintaining compensation

levels that are better than the industry average for much of our workforce. This may cause us, for

example, to absorb costs that other employers might seek to pass through to their workforces. Because

our business operates on very low margins, modest changes in various items in the consolidated

statements of income, particularly merchandise costs and SG&A expenses, can have substantial impacts

on net income.

Our operating model is generally the same across our U.S., Canadian, and Other International operating

segments (see Note 11 to the consolidated financial statements included in Item 8 of this Report). Certain

operations in the Other International segment have relatively higher rates of square footage growth, lower

wage and benefit costs as a percentage of sales, less or no direct membership warehouse competition, or

lack e-commerce or business delivery.

In discussions of our consolidated operating results, we refer to the impact of changes in foreign

currencies relative to the U.S. dollar, which are the differences between the foreign-exchange rates we

use to convert the financial results of our international operations from local currencies into U.S. dollars.

This impact of foreign-exchange rate changes is calculated based on the difference between the current

period's currency exchange rates and that of the comparable prior period. The impact of changes in

gasoline prices on net sales is calculated based on the difference between the current period's average

price per gallon sold and that of the comparable prior period.

Our fiscal year ends on the Sunday closest to August 31. References to 2022, 2021, and 2020 relate to

the 52-week fiscal years ended August 28, 2022, August 29, 2021, and August 30, 2020, respectively.

Certain percentages presented are calculated using actual results prior to rounding. Unless otherwise

noted, references to net income relate to net income attributable to Costco.

Highlights for 2022 versus 2021 include:

• We opened 26 new warehouses, including 3 relocations: 14 net new in the U.S., 2 net new in our

Canadian segment, and 7 new in our Other International segment, compared to 22 new

warehouses, including 2 relocations in 2021;

• Net sales increased 16% to $222,730 driven by a 14% increase in comparable sales and sales at

new warehouses opened in 2021 and 2022;

• Membership fee revenue increased 9% to $4,224, driven by new member sign-ups, upgrades to

Executive membership, and an increase in our renewal rate;

• Gross margin percentage decreased 65 basis points, driven primarily by our core merchandise

categories and a LIFO charge for higher merchandise costs;

• SG&A expenses as a percentage of net sales decreased 77 basis points, primarily due to leveraging

increased sales and ceasing of incremental wages related to COVID-19, despite additional wage

and benefits increases;

• We incurred a one-time $77 pretax charge, primarily related to granting our employees one

additional day of paid time off in March 2022;

• The effective tax rate in 2022 was 24.6% compared to 24.0% in 2021;

• Net income increased 17% to $5,844, or $13.14 per diluted share compared to $5,007, or $11.27 per

diluted share in 2021;

• In June 2022, the Company paid a cash dividend of $208 and purchased the remaining equity

interest of its Taiwan operations from its former joint-venture partner for $842, totaling $1,050 in the

aggregate; and

• In April 2022, the Board of Directors approved an increase in the quarterly cash dividend from $0.79

to $0.90 per share.

COVID-19

The COVID-19 pandemic continued to impact our business during 2022, albeit to a lesser extent. COVID-

related and other supply and logistics constraints have continued to adversely affect some merchandise

categories and are expected to do so for the foreseeable future. During 2021, we paid $515 in

incremental wages related to COVID-19, which ceased in February 2021.

RESULTS OF OPERATIONS

Net Sales

2022 2021 2020

Net Sales ................................................

$ 222,730 $ 192,052 $ 163,220

Increases in net sales:

U.S. .................................................

17% 16% 9%

Canada ..............................................

16% 22% 5%

Other International ....................................

10 % 23 % 13 %

Total Company ........................................

16% 18% 9%

Increases in comparable sales:

U.S. .................................................

16% 15% 8%

Canada ..............................................

15% 20% 5%

Other International ....................................

7% 19% 9%

Total Company ........................................

14% 16% 8%

Increases in comparable sales excluding the impact of

changes in foreign currency and gasoline prices:

U.S. .................................................

10% 14% 9%

Canada ..............................................

12% 12% 7%

Other International ....................................

10 % 13 % 11 %

Total Company ........................................

11% 13% 9%

Net Sales

Net sales increased $30,678 or 16% during 2022. The improvement was attributable to an increase in

comparable sales of 14%, and sales at new warehouses opened in 2021 and 2022. Sales increased

$15,830 in core merchandise categories and $14,848 in warehouse ancillary and other businesses. The

rate of increase was strongest in our gasoline, business centers, and travel businesses. Sales continued

to be impacted by inflation, higher than what we experienced in previous fiscal years.

During 2022, higher gasoline prices positively impacted net sales by $9,230, 481 basis points, compared

to 2021, with a 42% increase in the average price per gallon. The volume of gasoline sold increased

approximately 22%, positively impacting net sales by $3,847, 200 basis points. Changes in foreign

currencies relative to the U.S. dollar negatively impacted net sales by approximately $1,762, 92 basis

points, compared to 2021, attributable primarily to our Other International operations.

Comparable Sales

Comparable sales increased 14% during 2022 and were positively impacted by increases in shopping

frequency and average ticket, which includes the effects of inflation and changes in foreign currency. E-

commerce comparable sales increased 10% during 2022, including inflation.

Membership Fees

2022 2021 2020

Membership fees .........................................

$ 4,224 $ 3,877 $ 3,541

Membership fees increase .................................

9% 9% 6%

Membership fee revenue increased 9% in 2022, driven by new member sign-ups and upgrades to

Executive membership. Changes in foreign currencies relative to the U.S. dollar negatively impacted

membership fees by $42, compared to 2021. At the end of 2022, our member renewal rates were 93% in

the U.S. and Canada and 90% worldwide. Renewal rates continue to benefit from more members auto

renewing and increased penetration of Executive members, who on average renew at a higher rate. Our

renewal rate, which excludes affiliates of Business members, is a trailing calculation that captures

renewals during the period seven to eighteen months prior to the reporting date. We account for

membership fee revenue on a deferred basis, recognized ratably over the one-year membership period.

Gross Margin

2022 2021 2020

Net sales ................................................

$ 222,730 $ 192,052 $ 163,220

Less merchandise costs ...................................

199,382 170,684 144,939

Gross margin .............................................

$ 23,348 $ 21,368 $ 18,281

Gross margin percentage ..................................

10.48 % 11.13 % 11.20 %

Total gross margin percentage decreased 65 basis points compared to 2021. Excluding the impact of

gasoline price inflation on net sales, gross margin was 10.94%, a decrease of 19 basis points. This was

primarily due to a 33 basis-point decrease in core merchandise categories, predominantly driven by

decreases in fresh foods and foods and sundries, and 19 basis points due to a LIFO charge for higher

merchandise costs. Gross margin was also negatively impacted by one basis point due to increased 2%

rewards. Warehouse ancillary and other businesses positively impacted gross margin by 29 basis points,

predominantly gasoline, partially offset by e-commerce. Gross margin was positively impacted by five

basis points due to the net impact of ceasing incremental wages related to COVID-19 and the negative

impact of a one-time charge related to granting our employees one additional day of paid time off.

Changes in foreign currencies relative to the U.S. dollar negatively impacted gross margin by

approximately $176, compared to 2021, primarily attributable to our Other International Operations.

The gross margin in core merchandise categories, when expressed as a percentage of core merchandise

sales (rather than total net sales), decreased 27 basis points. The decrease was across all categories,

most significantly in fresh foods. This measure eliminates the impact of changes in sales penetration and

gross margins from our warehouse ancillary and other businesses.

Gross margin on a segment basis, when expressed as a percentage of the segment's own sales and

excluding the impact of changes in gasoline prices on net sales (segment gross margin percentage),

decreased across all segments. All segments were negatively impacted due to decreases in core

merchandise categories, partially offset by increases in warehouse ancillary and other businesses. Gross

margin in our U.S. segment was also negatively impacted by the LIFO charge. Our Other International

segment was negatively impacted by increased 2% rewards. All segments benefited from the ceasing of

incremental wages related to COVID-19.

Selling, General and Administrative Expenses

2022 2021 2020

SG&A expenses ..........................................

$ 19,779 $ 18,537 $ 16,387

SG&A expenses as a percentage of net sales ................

8.88 % 9.65 % 10.04 %

SG&A expenses as a percentage of net sales decreased 77 basis points compared to 2021. SG&A

expenses as a percentage of net sales excluding the impact of gasoline price inflation was 9.26%, a

decrease of 39 basis points. Warehouse operations and other businesses were lower by 17 basis points,

largely attributable to leveraging increased sales. This includes the impact of the starting wage increase

we instituted in October 2021, as well the increased wages and benefits that were effective on March 14,

2022, and July 4, 2022. SG&A expenses was benefited by a net of 16 basis points due to the positive

impact of ceasing incremental wages related to COVID-19, partially offset by higher write-offs of certain

information technology assets, and expenses related to granting our employees one additional day of

paid time off. Central operating costs were lower by five basis points, and stock compensation expense

was lower by one basis point. Changes in foreign currencies relative to the U.S. dollar decreased SG&A

expenses by approximately $148, compared to 2021, primarily attributable to our Other International

operations.

Interest Expense

2022 2021 2020

Interest expense ..........................................

$ 158 $ 171 $ 160

Interest expense primarily relates to Senior Notes and financing leases. Interest expense decreased in

2022 due to repayment of the 2.300% Senior Notes on December 1, 2021. For more information on our

debt arrangements, refer to the consolidated financial statements included in Item 8 of this Report.

Interest Income and Other, Net

2022 2021 2020

Interest income ...........................................

$61$41$89

Foreign-currency transaction gains, net ......................

106 56 7

Other, net ................................................

38 46 (4)

Interest income and other, net ..........................

$ 205 $ 143 $ 92

The increase in interest income in 2022 was primarily due to higher global interest rates. Foreign-currency

transaction gains, net, include revaluation or settlement of monetary assets and liabilities by our Canadian

and Other International operations and mark-to-market adjustments for forward foreign-exchange

contracts. See Derivatives and Foreign Currency sections in Note 1 to the consolidated financial

statements included in Item 8 of this Report.

Provision for Income Taxes

2022 2021 2020

Provision for income taxes .................................

$ 1,925 $ 1,601 $ 1,308

Effective tax rate ..........................................

24.6 % 24.0 % 24.4 %

The effective tax rate for 2022 was impacted by net discrete tax benefits of $130. This included $94 of

excess tax benefits r elated to stock compensation. Excluding discrete net tax benefits, the tax rate was

26.2% for 2022.

The effective tax rate for 2021 was impacted by net discrete tax benefits of $163. This included $75 of

excess tax benefits related to stock compensation, $70 related to the special cash dividend paid through

our 401(k) plan, and $19 related to a reduction in the valuation allowance against certain deferred tax

assets. Excluding net discrete tax benefits, the tax rate was 26.4% for 2021.

LIQUIDITY AND CAPITAL RESOURCES

The following table summarizes our significant sources and uses of cash and cash equivalents:

2022 2021 2020

Net cash provided by operating activities .....................

$ 7,392 $ 8,958 $ 8,861

Net cash used in investing activities .........................

(3,915) (3,535) (3,891)

Net cash used in financing activities .........................

(4,283) (6,488) (1,147)

Our primary sources of liquidity are cash flows generated from our operations, cash and cash equivalents,

and short-term investments. Cash and cash equivalents and short-term investments were $11,049 and

$12,175 at the end of 2022 and 2021, respectively. Of these balances, unsettled credit and debit card

receivables represented approximately $2,010 and $1,816 at the end of 2022 and 2021. These

receivables generally settle within four days. Changes in foreign exchange rates impacted cash and cash

equivalents negatively by $249 in 2022, and positively by $46 and $70 in 2021 and 2020.

Material contractual obligations arising in the normal course of business primarily consist of purchase

obligations, long-term debt and related interest payments, leases, and construction and land purchase

obligations. See Notes 4 and 5 to the consolidated financial statements included in Item 8 of this Report

for amounts outstanding on August 28, 2022, related to debt and leases.

Purchase obligations consist of contracts primarily related to merchandise, equipment, and third-party

services, the majority of which are due in the next 12 months. Construction and land purchase obligations

consist of contracts primarily related to the development and opening of new and relocated warehouses,

the majority of which (other than leases) are due in the next 12 months.

Management believes that our cash and investment position and operating cash flows with capacity under

existing and available credit agreements will be sufficient to meet our liquidity and capital requirements for

the foreseeable future. We believe that our U.S. current and projected asset position is sufficient to meet

our U.S. liquidity requirements.

Cash Flows from Operating Activities

Net cash provided by operating activities totaled $7,392 in 2022, compared to $8,958 in 2021. Our cash

flow provided by operations is primarily from net sales and membership fees. Cash flow used in

operations generally consists of payments to merchandise suppliers, warehouse operating costs,

including payroll and employee benefits, utilities, and credit and debit card processing fees. Cash used in

operations also includes payments for income taxes. Changes in our net investment in merchandise

inventories (the difference between merchandise inventories and accounts payable) is impacted by

several factors, including how fast inventory is sold, the forward deployment of inventory to accelerate

delivery times, payment terms with our suppliers, and early payments to obtain discounts from suppliers.

Cash Flows from Investing Activities

Net cash used in investing activities totaled $3,915 in 2022, compared to $3,535 in 2021, and is primarily

related to capital expenditures. Net cash flows from investing activities also includes purchases and

maturities of short-term investments.

Capital Expenditures

Our primary requirements for capital are acquiring land, buildings, and equipment for new and remodeled

warehouses. Capital is also required for information systems, manufacturing and distribution facilities,

initial warehouse operations, and working capital. In 2022, we spent $3,891 on capital expenditures, and

it is our current intention to spend approximately $3,800 to $4,000 during fiscal 2023. These expenditures

are expected to be financed with cash from operations, existing cash and cash equivalents, and short-

term investments. We opened 26 new warehouses, including three relocations, in 2022, and plan to open

approximately up to 29 additional new warehouses, including four relocations, in 2023. There can be no

assurance that current expectations will be realized, and plans are subject to change upon further review

of our capital expenditure needs or based on the economic environment.

Cash Flows from Financing Activities

Net cash used in financing activities totaled $4,283 in 2022, compared to $6,488 in 2021. Cash flows

used in financing activities primarily related to the payment of dividends, payments to our former joint-

venture partner for a dividend and the purchase of their equity interest in Taiwan, totaling $1,050 in the

aggregate, repayments of our 2.300% Senior Notes, repurchases of common stock, and withholding

taxes on stock awards.

Stock Repurchase Programs

During 2022 and 2021, we repurchased 863,000 and 1,358,000 shares of common stock, at average

prices of $511.46 and $364.39, respectively, totaling approximately $442 and $495, respectively. These

amounts may differ from the stock repurchase balances in the accompanying consolidated statements of

cash flows due to changes in unsettled stock repurchases at the end of each fiscal year. Purchases are

made from time-to-time, as conditions warrant, in the open market or in block purchases and pursuant to

plans under SEC Rule 10b5-1. Repurchased shares are retired, in accordance with the Washington

Business Corporation Act. The remaining amount available to be purchased under our approved plan was

$2,808 at the end of 2022.

Dividends

Cash dividends declared in 2022 totaled $3.38 per share, as compared to $12.98 per share in 2021.

Dividends in 2021 included a special dividend of $10.00 per share, aggregating approximately $4,430. In

April 2022, the Board of Directors increased our quarterly cash dividend from $0.79 to $0.90 per share.

Bank Credit Facilities and Commercial Paper Programs

We maintain bank credit facilities for working capital and general corporate purposes. At August 28, 2022,

we had borrowing capacity under these facilities of $1,257. Our international operations maintain $773 of

this capacity under bank credit facilities, of which $176 is guaranteed by the Company. Short-term

borrowings outstanding under the bank credit facilities were $88 and $41 at the end of 2022 and 2021.

The Company has letter of credit facilities, for commercial and standby letters of credit, totaling $224. The

outstanding commitments under these facilities at the end of 2022 totaled $184, most of which were

standby letters of credit that do not expire or have expiration dates within one year. The bank credit

facilities have various expiration dates, most within one year, and we generally intend to renew these

facilities. The amount of borrowings available at any time under our bank credit facilities is reduced by the

amount of standby and commercial letters of credit outstanding.

Off-Balance Sheet Arrangements

In the opinion of management, we have no off-balance sheet arrangements that have had or are

reasonably likely to have a material current or future effect on our financial condition or financial

statements.

Critical Accounting Estimates

The preparation of our consolidated financial statements in accordance with U.S. generally accepted

accounting principles (U.S. GAAP) requires that we make estimates and assumptions that affect the

reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date

of the financial statements and the reported amounts of revenues and expenses during the reporting

period. We base our estimates on historical experience and on assumptions that we believe to be

reasonable, and we continue to review and evaluate these estimates. For further information on

significant accounting policies, see discussion in Note 1 to the consolidated financial statements included

in Item 8 of this Report.

Insurance/Self-insurance Liabilities

Claims for employee health-care benefits, workers’ compensation, general liability, property damage,

directors’ and officers’ liability, vehicle liability, inventory loss, and other exposures are funded

predominantly through self-insurance. Insurance coverage is maintained for certain risks to seek to limit

exposures arising from very large losses. We use different risk management mechanisms, including a

wholly-owned captive insurance subsidiary, and participate in a reinsurance program. Liabilities

associated with the risks that we retain are not discounted and are estimated by using historical claims

experience, demographic factors, severity factors, and other actuarial assumptions. The costs of claims

are highly unpredictable and can fluctuate as a result of inflation rates, regulatory or legal changes, and

unforeseen developments in claims. While we believe our estimates are reasonable and provide for a

certain degree of coverage to account for these variables, actual claims and costs could differ significantly

from recorded liabilities. Historically, adjustments to our estimates have not been material.

Recent Accounting Pronouncements

We do not expect that any recently issued accounting pronouncements will have a material effect on our

financial statements.

Item 7A—Quantitative and Qualitative Disclosures About Market Risk (amounts in millions)

Our exposure to financial market risk results from fluctuations in interest rates and foreign currency

exchange rates. We do not engage in speculative or leveraged transactions or hold or issue financial

instruments for trading purposes.

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to our investment holdings that

are diversified among various instruments considered to be cash equivalents, as defined in Note 1 to the

consolidated financial statements included in Item 8 of this Report, as well as short-term investments in

government and agency securities with effective maturities of generally three months to five years at the

date of purchase. The primary objective of our investment activities is to preserve principal and

secondarily to generate yields. The majority of our short-term investments are in fixed interest-rate

securities. These securities are subject to changes in fair value due to interest rate fluctuations.

Our policy limits investments in the U.S. to direct U.S. government and government agency obligations,

repurchase agreements collateralized by U.S. government and government agency obligations, U.S.

government and government agency money market funds, and insured bank balances. Our wholly-owned

captive insurance subsidiary invests in U.S. government and government agency obligations and U.S.

government and government agency money market funds. Our Canadian and Other International

subsidiaries’ investments are primarily in money market funds, bankers’ acceptances, and bank

certificates of deposit, generally denominated in local currencies.

A 100 basis point change in interest rates as of the end of 2022 would have had an immaterial

incremental change in fair market value. For those investments that are classified as available-for-sale,

the unrealized gains or losses related to fluctuations in market volatility and interest rates are reflected

within stockholders’ equity in accumulated other comprehensive income in the consolidated balance

sheets.

The nature and amount of our long-term debt may vary as a result of business requirements, market

conditions, and other factors. As of the end of 2022, long-term debt with fixed interest rates was $6,590.

Fluctuations in interest rates may affect the fair value of the fixed-rate debt. See Note 4 to the

consolidated financial statements included in Item 8 of this Report for more information on our long-term

debt.

Foreign Currency Risk

Our foreign subsidiaries conduct c ertain transactions in non-functional currencies, which exposes us to

fluctuations in exchange rates. We manage these fluctuations, in part, through the use of forward foreign-

exchange contracts, seeking to economically hedge the impact of these fluctuations on known future

expenditures denominated in a non-functional foreign-currency. The contracts are intended primarily to

economically hedge exposure to U.S. dollar merchandise inventory expenditures made by our

international subsidiaries. We seek to mitigate risk with the use of these contracts and do not intend to

engage in speculative transactions. For additional information related to the Company's forward foreign-

exchange contracts, see Notes 1 and 3 to the consolidated financial statements included in Item 8 of this

Report. A hypothetical 10% strengthening of the functional currency compared to the non-functional

currency exchange rates at August 28, 2022, would have decreased the fair value of the contracts by

$128 and resulted in an unrealized loss in the consolidated statements of income for the same amount.

Commodity Price Risk

We are exposed to fluctuations in prices for energy, particularly electricity and natural gas, and other

commodities used in retail and manufacturing operations, which we seek to partially mitigate through

fixed-price contracts for certain of our warehouses and other facilities, predominantly in the U.S. and

Canada. We also enter into variable-priced contracts for some purchases of electricity and natural gas, in

addition to some of the fuel for our gas stations, on an index basis. These contracts meet the

characteristics of derivative instruments, but generally qualify for the “normal purchases and normal

sales” exception under authoritative guidance and require no mark-to-market adjustment.

Item 8—Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

Costco Wholesale Corporation:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Costco Wholesale Corporation and

subsidiaries (the Company) as of August 28, 2022, and August 29, 2021, the related consolidated

statements of income, comprehensive income, equity, and cash flows for each of the 52-week periods

ended August 28, 2022, August 29, 2021, and August 30, 2020, and the related notes (collectively, the

consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in

all material respects, the financial position of the Company as of August 28, 2022, and August 29, 2021,

and the results of its operations and its cash flows for each of the 52-week periods ended August 28,

2022, August 29, 2021, and August 30, 2020, in conformity with U.S. generally accepted accounting

principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight

Board (United States) (PCAOB), the Company’s internal control over financial reporting as of August 28,

2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the

Committee of Sponsoring Organizations of the Treadway Commission, and our report dated October 4,

2022, expressed an unqualified opinion on the effectiveness of the Company’s internal control over

financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our

responsibility is to express an opinion on these consolidated financial statements based on our audits. We

are a public accounting firm registered with the PCAOB and are required to be independent with respect

to the Company in accordance with the U.S. federal securities laws and the applicable rules and

regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that

we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial

statements are free of material misstatement, whether due to error or fraud. Our audits included

performing procedures to assess the risks of material misstatement of the consolidated financial

statements, whether due to error or fraud, and performing procedures that respond to those risks. Such

procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the

consolidated financial statements. Our audits also included evaluating the accounting principles used and

significant estimates made by management, as well as evaluating the overall presentation of the

consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the

consolidated financial statements that was communicated or required to be communicated to the audit

committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial

statements and (2) involved our especially challenging, subjective, or complex judgments. The

communication of a critical audit matter does not alter in any way our opinion on the consolidated financial

statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing

a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of workers' compensation self-insurance liabilities

As discussed in Note 1 to the consolidated financial statements, the Company estimates its self-

insurance liabilities by considering historical claims experience, demographic factors, severity

factors, and other actuarial assumptions. The estimated self-insurance liabilities as of August 28,

2022, were $1,364 million, a portion of which related to workers’ compensation self-insurance

liabilities for the United States operations.

We identified the evaluation of the Company’s workers’ compensation self-insurance liabilities for

the United States operations as a critical audit matter because of the extent of specialized skill

and knowledge needed to evaluate the underlying assumptions and judgments made by the

Company in the actuarial models. Specifically, subjective auditor judgment was required to

evaluate the Company's selected loss rates and initial expected losses used in the actuarial

models.

The following are the primary procedures we performed to address this critical audit matter. We

evaluated the design and tested the operating effectiveness of certain internal controls over the

Company’s self-insurance workers' compensation process. This included controls related to the

development and selection of the assumptions listed above used in the actuarial calculation and

review of the actuarial report. We involved actuarial professionals with specialized skills and

knowledge who assisted in:

• Assessing the actuarial models used by the Company for consistency with generally

accepted actuarial standards

• Evaluating the Company’s ability to estimate self-insurance workers' compensation

liabilities by comparing its historical estimates with actual incurred losses and paid losses

• Evaluating the above listed assumptions underlying the Company’s actuarial estimates by

developing an independent expectation of the self-insurance workers' compensation

liabilities and comparing them to the amounts recorded by the Company

/s/ KPMG LLP

We have served as the Company’s auditor since 2002.

Seattle, Washington

October 4, 2022

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

Costco Wholesale Corporation:

Opinion on Internal Control Over Financial Reporting

We have audited Costco Wholesale Corporation and subsidiaries’ (the Company) internal control over financial

reporting as of August 28, 2022, based on criteria established in Internal Control – Integrated Framework

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the

Company maintained, in all material respects, effective internal control over financial reporting as of August 28,

2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee

of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board

(United States) (PCAOB), the consolidated balance sheets of the Company as of August 28, 2022, and August

29, 2021, the related consolidated statements of income, comprehensive income, equity, and cash flows for

each of the 52-week periods ended

August 28, 2022, August 29, 2021, and August 30, 2020, and the related

notes (collectively, the consolidated financial statements), and our report dated

October 4, 2022, expressed an

unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting

and for its assessment of the effectiveness of internal control over financial reporting, included in the

accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is

to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a

public accounting firm registered with the PCAOB and are required to be independent with respect to the

Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the

Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan

and perform the audit to obtain reasonable assurance about whether effective internal control over financial

reporting was maintained in all material respects. Our audit of internal control over financial reporting included

obtaining an understanding of internal control over financial reporting, assessing the risk that a material

weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on

the assessed risk. Our audit also included performing such other procedures as we considered necessary in

the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance

regarding the reliability of financial reporting and the preparation of financial statements for external purposes in

accordance with generally accepted accounting principles. A company’s internal control over financial reporting

includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,

accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide

reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements

in accordance with generally accepted accounting principles, and that receipts and expenditures of the

company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use,

or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect

misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that

controls may become inadequate because of changes in conditions, or that the degree of compliance with the

policies or procedures may deteriorate.

/s/ KPMG LLP

Seattle, Washington

October 4, 2022

COSTCO WHOLESALE CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(amounts in millions, except per share data)

52 Weeks Ended

August 28,

2022

August 29,

2021

August 30,

2020

REVENUE

Net sales .................................

$ 222,730 $ 192,052 $ 163,220

Membership fees ..........................

4,224 3,877 3,541

Total revenue .........................

226,954 195,929 166,761

OPERATING EXPENSES

Merchandise costs .........................

199,382 170,684 144,939

Selling, general and administrative ...........

19,779 18,537 16,387

Operating income .....................

7,793 6,708 5,435

OTHER INCOME (EXPENSE)

Interest expense ..........................

(158) (171) (160)

Interest income and other, net ...............

205 143 92

INCOME BEFORE INCOME TAXES .............

7,840 6,680 5,367

Provision for income taxes ..................

1,925 1,601 1,308

Net income including noncontrolling interests ..

5,915 5,079 4,059

Net income attributable to noncontrolling

interests ................................

(71) (72) (57)

NET INCOME ATTRIBUTABLE TO COSTCO ....

$ 5,844 $ 5,007 $ 4,002

NET INCOME PER COMMON SHARE

ATTRIBUTABLE TO COSTCO:

Basic ....................................

$ 13.17 $ 11.30 $ 9.05

Diluted ...................................

$ 13.14 $ 11.27 $ 9.02

Shares used in calculation (000’s)

Basic ................................

443,651 443,089 442,297

Diluted ...............................

444,757 444,346 443,901

The accompanying notes are an integral part of these consolidated financial statements.

COSTCO WHOLESALE CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(amounts in millions)

52 Weeks Ended

August 28,

2022

August 29,

2021

August 30,

2020

NET INCOME INCLUDING NONCONTROLLING

INTERESTS .................................

$ 5,915 $ 5,079 $ 4,059

Foreign-currency translation adjustment and

other, net ................................

(721) 181 162

Comprehensive income ..........................

5,194 5,260 4,221

Less: Comprehensive income attributable to

noncontrolling interests ....................

36 93 80

COMPREHENSIVE INCOME ATTRIBUTABLE

TO COSTCO .................................

$ 5,158 $ 5,167 $ 4,141

The accompanying notes are an integral part of these consolidated financial statements.

COSTCO WHOLESALE CORPORATION

CONSOLIDATED BALANCE SHEETS

(amounts in millions, except par value and share data)

August 28,

2022

August 29,

2021

ASSETS

CURRENT ASSETS

Cash and cash equivalents ...................................

$ 10,203 $ 11,258

Short-term investments ......................................

846 917

Receivables, net ............................................

2,241 1,803

Merchandise inventories .....................................

17,907 14,215

Other current assets .........................................

1,499 1,312

Total current assets ......................................

32,696 29,505

OTHER ASSETS

Property and equipment, net ..................................

24,646 23,492

Operating lease right-of-use assets ............................

2,774 2,890

Other long-term assets .......................................

4,050 3,381

TOTAL ASSETS ........................................

$ 64,166 $ 59,268

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Accounts payable ...........................................

$ 17,848 $ 16,278

Accrued salaries and benefits .................................

4,381 4,090

Accrued member rewards ....................................

1,911 1,671

Deferred membership fees ...................................

2,174 2,042

Current portion of long-term debt ..............................

73 799

Other current liabilities .......................................

5,611 4,561

Total current liabilities ....................................

31,998 29,441

OTHER LIABILITIES

Long-term debt, excluding current portion ......................

6,484 6,692

Long-term operating lease liabilities ...........................

2,482 2,642

Other long-term liabilities .....................................

2,555 2,415

TOTAL LIABILITIES ....................................

43,519 41,190

COMMITMENTS AND CONTINGENCIES

EQUITY

Preferred stock $0.005 par value; 100,000,000 shares authorized;

no shares issued and outstanding ............................

——

Common stock $0.005 par value; 900,000,000 shares authorized;

442,664,000 and 441,825,000 shares issued and outstanding ....

Additional paid-in capital .....................................

6,884 7,031

Accumulated other comprehensive loss ........................

(1,829) (1,137)

Retained earnings ...........................................

15,585 11,666

Total Costco stockholders’ equity ..........................

20,642 17,564

Noncontrolling interests ......................................

5 514

TOTAL EQUITY ........................................

20,647 18,078

TOTAL LIABILITIES AND EQUITY .......................

$ 64,166 $ 59,268

The accompanying notes are an integral part of these consolidated financial statements.

COSTCO WHOLESALE CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY

(amounts in millions)

Common Stock

Additional

Paid-in

Capital

Accumulated

Other

Comprehensive

Income (Loss)

Retained

Earnings

Total Costco

Stockholders’

Equity

Noncontrolling

Interests

Total

Equity

(000’s) Amount

BALANCE AT

SEPTEMBER 1, 2019 .........

439,625 $ 4 $ 6,417 $ (1,436) $ 10,258 $ 15,243 $ 341 $ 15,584

Net income .................

— — — — 4,002 4,002 57 4,059

Foreign-currency translation

adjustment and other, net ..

— — — 139 — 139 23 162

Stock-based compensation ...

— — 621 — — 621 — 621

Release of vested restricted

stock units (RSUs),

including tax effects .......

2,273 — (330) — — (330) — (330)

Repurchases of common stock (643) — (10) — (188) (198) — (198)

Cash dividends declared and

other ....................

— — — — (1,193) (1,193) — (1,193)

BALANCE AT

AUGUST 30, 2020 ............

441,255 4 6,698 (1,297) 12,879 18,284 421 18,705

Net income .................

— — — — 5,007 5,007 72 5,079

Foreign-currency translation

adjustment and other, net ..

— — — 160 — 160 21 181

Stock-based compensation ...

— — 668 — — 668 — 668

Release of vested RSUs,

including tax effects .......

1,928 — (312) — — (312) — (312)

Repurchases of common stock (1,358) — (23) — (472) (495) — (495)

Cash dividends declared .....

— — — — (5,748) (5,748) — (5,748)

BALANCE AT

AUGUST 29, 2021 ............

441,825 4 7,031 (1,137) 11,666 17,564 514 18,078

Net income .................

— — — — 5,844 5,844 71 5,915

Foreign-currency translation

adjustment and other, net ..

— — — (686) — (686) (35) (721)

Stock-based compensation ...

— — 728 — — 728 — 728

Release of vested RSUs,

including tax effects .......

1,702 — (363) — — (363) — (363)

Dividend to noncontrolling

interest ..................

— — — — — — (208) (208)

Acquisition of noncontrolling

interest ..................

— — (499) (6) — (505) (337) (842)

Repurchases of common stock (863) — (15) — (427) (442) — (442)

Cash dividends declared and

other ....................

— (2) 2 — (1,498) (1,498) — (1,498)

BALANCE AT

AUGUST 28, 2022 ............

442,664 $ 2 $ 6,884 $ (1,829) $ 15,585 $ 20,642 $ 5 $ 20,647

The accompanying notes are an integral part of these consolidated financial statements.

COSTCO WHOLESALE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in millions)

52 Weeks Ended

August 28,

2022

August 29,

2021

August 30,

2020

CASH FLOWS FROM OPERATING ACTIVITIES

Net income including noncontrolling interests .........................

$ 5,915 $ 5,079 $ 4,059

Adjustments to reconcile net income including noncontrolling interests

to net cash provided by operating activities:

Depreciation and amortization .....................................

1,900 1,781 1,645

Non-cash lease expense ..........................................

377 286 194

Stock-based compensation ........................................

724 665 619

Other non-cash operating activities, net .............................

76 85 42

Deferred income taxes ............................................

(37) 59 104

Changes in operating assets and liabilities:

Merchandise inventories ........................................

(4,003) (1,892) (791)

Accounts payable ..............................................

1,891 1,838 2,261

Other operating assets and liabilities, net ..........................

549 1,057 728

Net cash provided by operating activities ..........................

7,392 8,958 8,861

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of short-term investments ................................

(1,121) (1,331) (1,626)

Maturities and sales of short-term investments ........................

1,145 1,446 1,678

Additions to property and equipment .................................

(3,891) (3,588) (2,810)

Acquisitions ......................................................

— — (1,163)

Other investing activities, net .......................................

(48) (62) 30

Net cash used in investing activities ..............................

(3,915) (3,535) (3,891)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issuance of long-term debt ............................

— — 3,992

Repayments of long-term debt ......................................

(800) (94) (3,200)

Tax withholdings on stock-based awards .............................

(363) (312) (330)

Repurchases of common stock ......................................

(439) (496) (196)

Cash dividend payments ...........................................

(1,498) (5,748) (1,479)

Dividend to noncontrolling interest ...................................

(208) — —

Acquisition of noncontrolling interest .................................

(842) — —

Other financing activities, net .......................................

(133) 162 66

Net cash used in financing activities ..............................

(4,283) (6,488) (1,147)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH

EQUIVALENTS ..................................................

(249) 46 70

Net change in cash and cash equivalents .............................

(1,055) (1,019) 3,893

CASH AND CASH EQUIVALENTS BEGINNING OF YEAR ..............

11,258 12,277 8,384

CASH AND CASH EQUIVALENTS END OF YEAR .....................

$ 10,203 $ 11,258 $ 12,277

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the year for:

Interest .......................................................

$ 145 $ 149 $ 124

Income taxes, net ..............................................

$ 1,940 $ 1,527 $ 1,052

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:

Capital expenditures included in liabilities .............................

$ 156 $ 184 $ 204

The accompanying notes are an integral part of these consolidated financial statements.

COSTCO WHOLESALE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in millions, except share, per share, and warehouse count data)

Note 1—Summary of Significant Accounting Policies

Description of Business

Costco Wholesale Corporation (Costco or the Company), a Washington corporation, and its subsidiaries

operate membership warehouses based on the concept that offering members low prices on a limited

selection of nationally-branded and private-label products in a wide range of merchandise categories will

produce high sales volumes and rapid inventory turnover. At August 28, 2022, Costco operated 838

warehouses worldwide: 578 in the United States (U.S.) located in 46 states, Washington, D.C., and

Puerto Rico, 107 in Canada, 40 in Mexico, 31 in Japan, 29 in the United Kingdom (U.K.), 17 in Korea, 14

in Taiwan, 13 in Australia, four in Spain, two each in France and China, and one in Iceland. The Company

operates e-commerce websites in the U.S., Canada, U.K., Mexico, Korea, Taiwan, Japan, and Australia.

Basis of Presentation

The consolidated financial statements include the accounts of Costco, its wholly-owned subsidiaries, and

subsidiaries in which it has a controlling interest. The Company reports noncontrolling interests in

consolidated entities as a component of equity separate from the Company’s equity. All material inter-

company transactions between and among the Company and its consolidated subsidiaries have been

eliminated in consolidation. During 2022, the Company paid a cash dividend of $208 and purchased the

equity interest of its Taiwan operations from its former joint-venture partner for $842, totaling $1,050 in the

aggregate. The remaining noncontrolling interest represents the portion of equity interests in a

consolidated joint venture that is not 100% owned by the Company. Unless otherwise noted, references

to net income relate to net income attributable to Costco.

Fiscal Year End

The Company operates on a 52/53-week fiscal year basis with the year ending on the Sunday closest to

August 31. References to 2022, 2021, and 2020 relate to the 52-week fiscal years ended August 28,

2022, August 29, 2021, and August 30, 2020, respectively.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles

(U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts

of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial

statements and the reported amounts of revenues and expenses during the reporting period. These

estimates and assumptions take into account historical and forward-looking factors that the Company

believes are reasonable. Actual results could differ from those estimates and assumptions.

Reclassification

Reclassifications were made to our 2021 and 2020 consolidated statements of income and cash flows to

conform with current year presentation.

Cash and Cash Equivalents

The Company considers as cash and cash equivalents all cash on deposit, highly liquid investments with

a maturity of three months or less at the date of purchase, and proceeds due from credit and debit card

transactions with settlement terms of up to four days. Credit and debit card receivables were $2,010 and

$1,816 at the end of 2022 and 2021.

The Company provides for the daily replenishment of major bank accounts as payments are presented.

Included in accounts payable at the end of 2022 and 2021, are $995 and $999 representing the excess of

outstanding payments over cash on deposit at the banks on which the payments were drawn.

Short-Term Investments

Short-term investments generally consist of debt securities (U.S. Government and Agency Notes), with

maturities at the date of purchase of three months to five years. Investments with maturities beyond five

years may be classified, based on the Company’s determination, as short-term based on their highly

liquid nature and because they represent the investment of cash that is available for current operations.

Short-term investments classified as available-for-sale are recorded at fair value using the specific

identification method with the unrealized gains and losses reflected in accumulated other comprehensive

income (loss) until realized. Realized gains and losses from the sale of available-for-sale securities, if any,

are determined on a specific identification basis and are recorded in interest income and other, net in the

consolidated statements of income. These available-for-sale investments have a low level of inherent

credit risk given they are issued by the U.S. Government and Agencies. Changes in their fair value are

primarily attributable to changes in interest rates and market liquidity. Short-term investments classified as

held-to-maturity are financial instruments that the Company has the intent and ability to hold to maturity

and are reported net of any related amortization and are not remeasured to fair value on a recurring

basis.

The Company periodically evaluates unrealized losses in its investment securities for credit impairment,

using both qualitative and quantitative criteria. In the event a security is deemed to be impaired as the

result of a credit loss, the Company recognizes the loss in interest income and other, net in the

consolidated statements of income.

Fair Value of Financial Instruments

The Company accounts for certain assets and liabilities at fair value. The carrying value of the Company’s

financial instruments, including cash and cash equivalents, receivables and accounts payable,

approximate fair value due to their short-term nature or variable interest rates. See Notes 2, 3, and 4 for

the carrying value and fair value of the Company’s investments, derivative instruments, and fixed-rate

debt, respectively.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an

orderly transaction between market participants at the measurement date. Fair value is estimated by

applying a fair value hierarchy, which requires maximizing the use of observable inputs when measuring

fair value. The three levels of inputs are:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market

data.

Level 3: Significant unobservable inputs that are not corroborated by market data.

The Company’s valuation techniques used to measure the fair value of money market mutual funds are

based on quoted market prices, such as quoted net asset values published by the fund as supported in

an active market. Valuation methodologies used to measure the fair value of all other non-derivative

financial instruments are based on independent external valuation information. The pricing process uses

data from a variety of independent external valuation information providers, including trades, bid price or

spread, two-sided markets, quotes, benchmark curves including but not limited to treasury benchmarks

and LIBOR or Secured Overnight Financing Rate and swap curves, discount rates, and market data

feeds. All are observable in the market or can be derived principally from or corroborated by observable

market data. The Company reports transfers in and out of Levels 1, 2, and 3, as applicable, using the fair

value of the individual securities as of the beginning of the reporting period in which the transfer(s)

occurred.

Current financial liabilities have fair values that approximate their carrying values. Long-term financial

liabilities include the Company's long-term debt, which are recorded on the balance sheet at issuance

price and adjusted for unamortized discounts or premiums and debt issuance costs, and are being

amortized to interest expense over the term of the loan. The estimated fair value of the Company's long-

term debt is based primarily on reported market values, recently completed market transactions, and

estimates based upon interest rates, maturities, and credit.

Receivables, Net

Receivables consist primarily of vendor, credit card incentive, reinsurance, third-party pharmacy and other

receivables. Vendor receivables include discounts and volume rebates. Balances are generally presented

on a gross basis, separate from any related payable due. In certain circumstances, these receivables may

be settled against the related payable to that vendor, in which case the receivables are presented on a

net basis. Credit card incentive receivables primarily represent amounts earned under the co-branded

credit card arrangements in the U.S. and Canada. Reinsurance receivables are held by the Company’s

wholly-owned captive insurance subsidiary and primarily represent amounts ceded through reinsurance

arrangements gross of the amounts assumed under reinsurance, which are presented within other current

liabilities in the consolidated balance sheets. Third-party pharmacy receivables generally relate to

amounts due from members’ insurers. Other receivables primarily consist of amounts due from

governmental entities, mostly tax-related items.

The valuation allowance related to receivables was not material to our consolidated financial statements

at the end of 2022, 2021, and 2020.

Merchandise Inventories

Merchandise inventories consist of the following:

2022 2021

United States ............................................

$ 13,160 $ 10,248

Canada .................................................

1,966 1,456

Other International ........................................

$ 2,781 $ 2,511

Merchandise inventories ...............................

$ 17,907 $ 14,215

Merchandise inventories are stated at the lower of cost or market. U.S. merchandise inventories are

valued by the cost method of accounting, using the last-in, first-out (LIFO) basis. The Company believes

the LIFO method more fairly presents the results of operations by more closely matching current costs

with current revenues. The Company records an adjustment each quarter, if necessary, for the projected

annual effect of inflation or deflation, and these estimates are adjusted to actual results determined at

year-end, after actual inflation or deflation rates and inventory levels have been determined. Due to

inflation, a $438 charge was recorded during 2022 to merchandise costs to increase the cumulative LIFO

valuation on merchandise inventories at August 28, 2022. An immaterial LIFO charge was recorded in

2021. Canadian and Other International merchandise inventories are predominantly valued using the cost

and retail inventory methods, respectively, using the first-in, first-out (FIFO) basis.

The Company provides for estimated inventory losses between physical inventory counts using estimates

based on experience. The provision is adjusted periodically to reflect physical inventory counts, which

generally occur in the second and fourth fiscal quarters. Inventory cost, where appropriate, is reduced by

estimates of vendor rebates when earned or as the Company progresses towards earning those rebates,

provided that they are probable and reasonably estimable.

Property and Equipment, Net

Property and equipment are stated at cost. Depreciation and amortization expense is computed primarily

using the straight-line method over estimated useful lives. Leasehold improvements made after the

beginning of the initial lease term are depreciated over the shorter of the estimated useful life of the asset

or the remaining term of the initial lease plus any renewals that are reasonably certain at the date the

leasehold improvements are made.

The Company capitalizes certain computer software and costs incurred in developing or obtaining

software for internal use. During development, these costs are included in construction in progress. To the

extent that the assets become ready for their intended use, these costs are included in equipment and

fixtures and amortized on a straight-line basis over their estimated useful lives. In 2022 and 2021, the

Company recognized in SG&A expenses write-offs of $118 and $84 for certain information technology

assets.

Repair and maintenance costs are expensed when incurred. Expenditures for remodels, refurbishments

and improvements that add to or change asset function or useful life are capitalized. Assets removed

during the remodel, refurbishment or improvement are retired. Assets classified as held-for-sale at the

end of 2022 and 2021 were immaterial.

The following table summarizes the Company's property and equipment balances at the end of 2022 and

2021:

Estimated Useful

Lives 2022 2021

Land .................................

N/A $ 7,955 $ 7,507

Buildings and improvements ............

5-50 years 20,120 19,139

Equipment and fixtures .................

3-20 years 10,275 9,505

Construction in progress ................

N/A 1,582 1,507

39,932 37,658

Accumulated depreciation and amortization .................

(15,286) (14,166)

Property and equipment, net ...........................

$ 24,646 $ 23,492

The Company evaluates long-lived assets for impairment on an annual basis, when relocating or closing

a facility, or when events or changes in circumstances may indicate the carrying amount of the asset

group, generally an individual warehouse, may not be fully recoverable. For asset groups held and used,

including warehouses to be relocated, the carrying value of the asset group is considered recoverable

when the estimated future undiscounted cash flows generated from the use and eventual disposition of

the asset group exceed the respective carrying value. In the event that the carrying value is not

considered recoverable, an impairment loss is recognized for the asset group to be held and used equal

to the excess of the carrying value above the estimated fair value of the asset group. For asset groups

classified as held-for-sale (disposal group), the carrying value is compared to the disposal group’s fair

value less costs to sell. The Company estimates fair value by obtaining market appraisals from third party

brokers or using other valuation techniques. There were no impairment charges recognized in 2022 or

2020. Impairment charges recognized in 2021 were immaterial.

Leases

The Company leases land, buildings, and/or equipment at warehouses and certain other office and

distribution facilities. Leases generally contain one or more of the following options, which the Company

can exercise at the end of the initial term: (a) renew the lease for a defined number of years at the then-

fair market rental rate or rate stipulated in the lease agreement; (b) purchase the property at the then-fair

market value; or (c) a right of first refusal in the event of a third-party offer.

Some leases include free-rent periods and step-rent provisions, which are recognized on a straight-line

basis over the original term of the lease and any extension options that the Company is reasonably

certain to exercise from the date the Company has control of the property. Certain leases provide for

periodic rent increases based on price indices or the greater of minimum guaranteed amounts or sales

volume. Our leases do not contain any material residual value guarantees or material restrictive

covenants.

The Company determines at inception whether a contract is or contains a lease. Non-lease components

and the lease components to which they relate are accounted for together as a single lease component

for all asset classes. The Company initially records right-of-use (ROU) assets and lease obligations for its

finance and operating leases based on the discounted future minimum lease payments over the term.

The lease term is defined as the noncancelable period of the lease plus any options to extend when it is

reasonably certain that the Company will exercise the option. As the rate implicit in the Company's leases

is not easily determinable, the present value of the sum of the lease payments is calculated using the

Company's incremental borrowing rate. The rate is determined using a portfolio approach based on the

rate of interest the Company would pay to borrow an amount equal to the lease payments on a

collateralized basis over a similar term. The Company uses quoted interest rates from financial institutions

to derive the incremental borrowing rate. Impairment of ROU assets is evaluated in a similar manner as

described in Property and Equipment, net above.

The Company's asset retirement obligations (ARO) primarily relate to leasehold improvements that must

be removed at the end of a lease. These obligations are generally recorded as a discounted liability, with

an offsetting asset at the inception of the lease term, based upon the estimated fair value of the costs to

remove the improvements. These liabilities are accreted over time to the projected future value of the

obligation. The ARO assets are depreciated using the same depreciation method as the leasehold

improvement assets and are included with buildings and improvements. Estimated ARO liabilities

associated with these leases are included in other liabilities in the accompanying consolidated balance

sheet.

Goodwill and Acquired Intangible Assets

Goodwill represents the excess of acquisition cost over the fair value of the net assets acquired and is not

subject to amortization. The Company reviews goodwill annually in the fourth quarter for impairment or

when circumstances indicate carrying value may exceed the fair value. This evaluation is performed at

the reporting unit level. If a qualitative assessment indicates that it is more likely than not that the fair

value is less than carrying value, a quantitative analysis is completed using either the income or market

approach, or a combination of both. The income approach estimates fair value based on expected

discounted future cash flows, while the market approach uses comparable public companies and

transactions to develop metrics to be applied to historical and expected future operating results.

Goodwill is included in other long-term assets in the consolidated balance sheets. The following table

summarizes goodwill by reportable segment:

United

States Canada

Other

International Total

Balance at August 30, 2020 ....................

$ 947 $ 27 $ 14 $ 988

Changes in currency translation and other

(1)

6118

Balance at August 29, 2021 ....................

$ 953 $ 28 $ 15 $ 996

Changes in currency translation .............

— (1) (2) (3)

Balance at August 28, 2022 ....................

$ 953 $ 27 $ 13 $ 993

____________

(1) Other consists of changes to the purchase price allocation.

Definite-lived intangible assets, which are not material, are included in other long-term assets on the

consolidated balance sheets and are amortized on a straight-line basis over their estimated lives, which

approximates the pattern of expected economic benefit.

Insurance/Self-insurance Liabilities

Claims for employee health care benefits, workers’ compensation, general liability, property damage,

directors’ and officers’ liability, vehicle liability, inventory loss, and other exposures are funded

predominantly through self-insurance. Insurance coverage is maintained for certain risks to limit

exposures arising from very large losses. The Company uses different risk management mechanisms,

including a wholly-owned captive insurance subsidiary (the captive) and participates in a reinsurance

program. Liabilities associated with the risks that are retained by the Company are not discounted and are

estimated, in part, by considering historical claims experience, demographic factors, severity factors, and

other actuarial assumptions. The estimated accruals for these liabilities could be significantly affected if

future occurrences and claims differ from these assumptions and historical trends. At the end of 2022 and

2021, these insurance liabilities were $1,364 and $1,257 in the aggregate, respectively, and were

included in accrued salaries and benefits and other current liabilities in the consolidated balance sheets,

classified based on their nature.

The captive receives direct premiums, which are netted against the Company’s premium costs in selling,

general and administrative expenses, in the consolidated statements of income. The captive participates

in a reinsurance program that includes other third-party participants. The reinsurance agreement is one

year in duration, and new agreements are entered into by each participant at their discretion at the

commencement of the next calendar year. The participant agreements and practices of the reinsurance

program are designed to limit a participating members’ individual risk. Income statement adjustments

related to the reinsurance program and related impacts to the consolidated balance sheets are

recognized as information becomes known. In the event the Company leaves the reinsurance program,

the Company retains its primary obligation to the policyholders for prior activity.

Derivatives

The Company is exposed to foreign-currency exchange-rate fluctuations in the normal course of

business. It manages these fluctuations, in part, through the use of forward foreign-exchange contracts,

seeking to economically hedge the impact of fluctuations of foreign exchange on known future

expenditures denominated in a non-functional foreign-currency. The contracts relate primarily to U.S.

dollar merchandise inventory expenditures made by the Company’s international subsidiaries with

functional currencies other than the U.S. dollar. Currently, these contracts do not qualify for derivative

hedge accounting. The Company seeks to mitigate risk with the use of these contracts and does not

intend to engage in speculative transactions. Some of these contracts contain credit-risk-related

contingent features that require settlement of outstanding contracts upon certain triggering events. The

aggregate fair value amounts of derivative instruments in a net liability position and the amount needed to

settle the instruments immediately if the credit-risk-related contingent features were triggered were

immaterial at the end of 2022. There were no derivative instruments in a net liability position at the end of

2021. The aggregate notional amounts of open, unsettled forward foreign-exchange contracts were

$1,242 and $1,331 at the end of 2022 and 2021, respectively. See Note 3 for information on the fair value

of unsettled forward foreign-exchange contracts at the end of 2022 and 2021.

The unrealized gains or losses recognized in interest income and other, net in the accompanying

consolidated statements of income relating to the net changes in the fair value of unsettled forward

foreign-exchange contracts were immaterial in 2022, 2021 and 2020.

The Company is exposed to fluctuations in prices for energy, particularly electricity and natural gas, and

other commodity products used in retail and manufacturing operations, which it seeks to partially mitigate

through the use of fixed-price contracts for certain of its warehouses and other facilities, primarily in the

U.S. and Canada. The Company also enters into variable-priced contracts for some purchases of natural

gas, in addition to fuel for its gas stations, on an index basis. These contracts meet the characteristics of

derivative instruments, but generally qualify for the “normal purchases and normal sales” exception under

authoritative guidance and require no mark-to-market adjustment.

Foreign Currency

The functional currencies of the Company’s international subsidiaries are their local currencies. Assets

and liabilities recorded in foreign currencies are translated at the exchange rate on the balance sheet

date. Translation adjustments are recorded in accumulated other comprehensive loss. Revenues and

expenses of the Company’s consolidated foreign operations are translated at average exchange rates

prevailing during the year.

The Company recognizes foreign-currency transaction gains and losses related to revaluing or settling

monetary assets and liabilities denominated in currencies other than the functional currency in interest

income and other, net in the consolidated statements of income. Generally, these include the U.S. dollar

cash and cash equivalents and the U.S. dollar payables of consolidated subsidiaries revalued to their

functional currency. Also included are realized foreign-currency gains or losses from settlements of

forward foreign-exchange contracts. These items were $84 in 2022 and immaterial in 2021 and 2020.

Revenue Recognition

The Company recognizes sales for the amount of consideration collected from the member, which

includes gross shipping fees where applicable, and is net of sales taxes collected and remitted to

government agencies and member returns. The Company reserves for estimated returns based on

historical trends in merchandise returns and reduces sales and merchandise costs accordingly. The

Company records, on a gross basis, a refund liability and an asset for recovery, which are included in

other current liabilities and other current assets, respectively, in the consolidated balance sheets.

The Company offers merchandise in the following core merchandise categories: foods and sundries, non-

foods, and fresh foods. The Company also provides expanded products and services through warehouse

ancillary and other businesses. The majority of revenue from merchandise sales is recognized at the point

of sale. Revenue generated through e-commerce or special orders is generally recognized upon shipment

to the member. For merchandise shipped directly to the member, shipping and handling costs are

expensed as incurred as fulfillment costs and included in merchandise costs in the consolidated

statements of income. In certain ancillary businesses, revenue is deferred until the member picks up

merchandise at the warehouse. Deferred sales are included in other current liabilities in the consolidated

balance sheets.

The Company is the principal for the majority of its transactions and recognizes revenue on a gross basis.

The Company is the principal when it has control of the merchandise or service before it is transferred to

the member, which generally is established when Costco is primarily responsible for merchandising

decisions, pricing discretion, and maintains the relationship with the member, including assurance of

member service and satisfaction.

The Company accounts for membership fee revenue, net of refunds, on a deferred basis, ratably over the

one-year membership period. Deferred membership fees at the end of 2022 and 2021 were $2,174 and

$2,042, respectively.

In most countries, the Company's Executive members qualify for a 2% reward on qualified purchases,

subject to an annual maximum value, which does not expire and is redeemable at Costco warehouses.

The Company accounts for this reward as a reduction in sales, net of the estimated impact of non-

redemptions (breakage), with the corresponding liability classified as accrued member rewards in the

consolidated balance sheets. Estimated breakage is computed based on redemption data. For 2022,

2021, and 2020, the net reduction in sales was $2,307, $2,047, and $1,707 respectively.

The Company sells and otherwise provides proprietary shop cards that do not expire and are redeemable

at the warehouse or online for merchandise or membership. Revenue from shop cards is recognized

upon redemption, and estimated breakage is recognized based on redemption data. The Company

accounts for outstanding shop card balances as a shop card liability, net of estimated breakage. Shop

card liabilities are included in other current liabilities in the consolidated balance sheets.

Citibank, N.A. became the exclusive issuer of co-branded credit cards to U.S. members in June 2016.

The Company receives various forms of consideration from Citibank, including a royalty on purchases

made on the card outside of Costco. A portion of the royalty is used to fund the r ebate that cardholders

receive, after taking into consideration breakage, which is calculated based on rebate redemption data.

The rebates are issued in February and expire on December 31. The Company also maintains co-

branded credit card arrangements in Canada and certain other International subsidiaries.

Merchandise Costs

Merchandise costs consist of the purchase price or manufacturing costs of inventory sold, inbound and

outbound shipping charges and all costs related to the Company’s depot, fulfillment and manufacturing

operations, including freight from depots to selling warehouses, and are reduced by vendor consideration.

Merchandise costs also include salaries, benefits, depreciation, and utilities in fresh foods and certain

ancillary departments.

Vendor Consideration

The Company has agreements to receive funds from vendors for discounts and a variety of other

programs. These programs are evidenced by signed agreements that are reflected in the carrying value

of the inventory when earned or as the Company progresses towards earning the rebate or discount, and

as a component of merchandise costs as the merchandise is sold. Other vendor consideration is

generally recorded as a reduction of merchandise costs upon completion of contractual milestones, terms

of the related agreement, or by another systematic approach.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of salaries, benefits and workers’

compensation costs for warehouse employees (other than fresh foods departments and certain ancillary

businesses which are reflected in merchandise costs) as well as all regional and home office employees,

including buying personnel. Selling, general and administrative expenses also include substantially all

building and equipment depreciation, stock compensation expense, credit and debit card processing fees,

utilities, preopening, as well as other operating costs incurred to support warehouse and e-commerce

website operations.

Retirement Plans

The Company's 401(k) retirement plan is available to all U.S. employees over the age of 18 who have

completed 90 days of employment. The plan allows participants to make wage deferral contributions, a

portion of which the Company matches. In addition, the Company provides each eligible participant an

annual discretionary contribution. The Company also has a defined contribution plan for employees in

Canada and contributes a percentage of each employee's wages. Certain subsidiaries in the Company's

Other International operations have defined benefit and defined contribution plans, which are not material.

Amounts expensed under all plans were $824, $748, and $676 for 2022, 2021, and 2020, and are

predominantly included in SG&A expenses in the consolidated statements of income.

Stock-Based Compensation

Restricted Stock Units (RSUs) granted to employees generally vest over five years and allow for quarterly

vesting of the pro-rata number of stock-based awards that would vest on the next anniversary of the grant

date in the event of retirement or voluntary termination. Actual forfeitures are recognized as they occur.

Compensation expense for stock-based awards is predominantly recognized using the straight-line

method over the requisite service period for the entire award. Awards for employees and non-employee

directors provide for accelerated vesting based on cumulative years of service with the Company.

Compensation expense for the accelerated shares is recognized upon achievement of the long-service

term. The cumulative amount of compensation cost recognized at any point in time equals at least the

portion of the grant-date fair value of the award that is vested at that date. The fair value of RSUs is

calculated as the market value of the common stock on the measurement date less the present value of

the expected dividends forgone during the vesting period.

Stock-based compensation expense is predominantly included in SG&A expenses in the consolidated

statements of income. Certain stock-based compensation costs are capitalized or included in the cost of

merchandise. See Note 7 for additional information on the Company’s stock-based compensation plans.

Income Taxes

The Company accounts for income taxes using the asset and liability method. Deferred tax assets and

liabilities are recognized for the future tax consequences attributed to differences between the financial

statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credits

and loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates

expected to apply to taxable income in the years in which those temporary differences and carry-forwards

are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax

rates is recognized in income in the period that includes the enactment date. A valuation allowance is

established when necessary to reduce deferred tax assets to amounts that are more likely than not

expected to be realized.

The timing and amounts of deductible and taxable items and the probability of sustaining uncertain tax

positions requires significant judgment. The benefits of uncertain tax positions are recorded in the

Company’s consolidated financial statements only after determining a more-likely-than-not probability that

the uncertain tax positions will withstand challenge from tax authorities. When facts and circumstances

change, the Company reassesses these probabilities and records any changes as appropriate.

Net Income per Common Share Attributable to Costco

The computation of basic net income per share uses the weighted average number of shares that were

outstanding during the period. The computation of diluted net income per share uses the weighted

average number of shares in the basic net income per share calculation plus the number of common

shares that would be issued assuming vesting of all potentially dilutive common shares outstanding using

the treasury stock method for shares subject to RSUs.

Stock Repurchase Programs

Repurchased shares of common stock are retired, in accordance with the Washington Business

Corporation Act. The par value of repurchased shares is deducted from common stock and the excess

repurchase price over par value is deducted by allocation to additional paid-in capital and retained

earnings. The amount allocated to additional paid-in capital is the current value of additional paid-in

capital per share outstanding and is applied to the number of shares repurchased. Any remaining amount

is allocated to retained earnings. See Note 6 for additional information.

Note 2—Investments

The Company’s investments were as follows:

2022:

Cost

Basis

Unrealized

Losses, Net

Recorded

Basis

Available-for-sale:

Government and agency securities ..............

$ 534 $ (5) $ 529

Held-to-maturity:

Certificates of deposit ..........................

317 — 317

Total short-term investments ................

$ 851 $ (5) $ 846

2021:

Cost

Basis

Unrealized

Gains, Net

Recorded

Basis

Available-for-sale:

Government and agency securities ..............

$375$ 6$381

Held-to-maturity:

Certificates of deposit ..........................

536 — 536

Total short-term investments ................

$911$ 6$917

Gross unrecognized holding gains and losses on available-for-sale securities were not material for the

years ended August 28, 2022, and August 29, 2021. At those dates, there were no available-for-sale

securities in a material continuous unrealized-loss position. There were no sales of available-for-sale

securities during 2022 or 2021.

The maturities of available-for-sale and held-to-maturity securities at the end of 2022 are as follows:

Available-For-Sale

Held-To-MaturityCost Basis Fair Value

Due in one year or less ............................

$ 276 $ 274 $ 317

Due after one year through five years ................

197 195 —

Due after five years ...............................

61 60 —

Total .........................................

$ 534 $ 529 $ 317

Note 3—Fair Value Measurement

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The table below presents information regarding the Company’s financial assets and financial liabilities

that are measured at fair value on a recurring basis and indicate the level within the hierarchy reflecting

the valuation techniques utilized to determine such fair value.

Level 2

2022 2021

Investment in government and agency securities

(1)

............

$ 529 $ 393

Forward foreign-exchange contracts, in asset position

(2)

.......

34 17

Forward foreign-exchange contracts, in (liability) position

(2)

.....

(2) (2)

Total .................................................

$ 561 $ 408

____________

(1) At August 29, 2021, $12 cash and cash equivalents and $381 short-term investments are included in the consolidated

balance sheets.

(2) The asset and the liability values are included in other current assets and other current liabilities, respectively, in the

consolidated balance sheets.

At August 28, 2022, and August 29, 2021, the Company did not hold any Level 1 or 3 financial assets or

liabilities that were measured at fair value on a recurring basis. There were no transfers between levels

during 2022 or 2021.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Assets and liabilities recognized and disclosed at fair value on a nonrecurring basis include items such as

financial assets measured at amortized cost and long-lived nonfinancial assets. These assets are

measured at fair value if determined to be impaired. There were no fair value adjustments to nonfinancial

assets during 2022 and in 2021 they were immaterial.

Note 4—Debt

Short-Term Borrowings

The Company maintains various short-term bank credit facilities, with a borrowing capacity of $1,257 and

$1,050, in 2022 and 2021, respectively. Borrowings on these short-term facilities were immaterial during

2022 and 2021. Short-term borrowings outstanding were $88 and $41 at the end of 2022 and 2021.

Long-Term Debt

The Company's long-term debt consists primarily of Senior Notes, described below. On December 1,

2021, the Company repaid, prior to maturity, the 2.300% Senior Notes at a redemption price plus accrued

interest as specified in the Notes' agreement.

The Company at its option may redeem the Senior Notes at any time, in whole or in part, at a redemption

price plus accrued interest. The redemption price is equal to the greater of 100% of the principal amount

or the sum of the present value of the remaining scheduled payments of principal and interest to maturity.

Additionally, upon certain events, the holder has the right to require the Company to purchase this

security at a price of 101% of the principal amount plus accrued and unpaid interest to the date of the

event. Interest on all outstanding long-term debt is payable semi-annually. The estimated fair value of

Senior Notes is valued using Level 2 inputs.

Other long-term debt consists of Guaranteed Senior Notes issued by the Company's Japanese

subsidiary, valued using Level 3 inputs.

At the end of 2022 and 2021, the fair value of the Company's long-term debt, including the current portion,

was approximately $6,033 and $7,692, respectively. The carrying value of long-term debt consisted of the

following:

2022 2021

2.300% Senior Notes due May 2022 ........................

$ — $ 800

2.750% Senior Notes due May 2024 ........................

1,000 1,000

3.000% Senior Notes due May 2027 ........................

1,000 1,000

1.375% Senior Notes due June 2027 ........................

1,250 1,250

1.600% Senior Notes due April 2030 ........................

1,750 1,750

1.750% Senior Notes due April 2032 ........................

1,000 1,000

Other long-term debt ......................................

590 731

Total long-term debt ...................................

6,590 7,531

Less unamortized debt discounts and issuance costs ......

33 40

Less current portion

(1)

..................................

73 799

Long-term debt, excluding current portion ................

$ 6,484 $ 6,692

_______________

(1) Net of unamortized debt discounts and issuance costs.

Maturities of long-term debt during the next five fiscal years and thereafter are as follows:

2023 ......................................................................

$73

2024 ......................................................................

1,088

2025 ......................................................................

110

2026 ......................................................................

2027 ......................................................................

2,250

Thereafter ..............................................................

2,988

Total ...............................................................

$ 6,590

Note 5—Leases

The tables below present information regarding the Company's lease assets and liabilities.

2022 2021

Assets

Operating lease right-of-use assets .......................

$ 2,774 $ 2,890

Finance lease assets

(1)

.................................

1,620 1,000

Total lease assets ...............................

$ 4,394 $ 3,890

Liabilities

Current

Operating lease liabilities

(2)

..........................

$ 239 $ 222

Finance lease liabilities

(2)

............................

245 72

Long-term

Operating lease liabilities ............................

2,482 2,642

Finance lease liabilities

(3)

............................

1,383 980

Total lease liabilities .............................

$ 4,349 $ 3,916

_______________

(1) Included in other long-term assets in the consolidated balance sheets.

(2) Included in other current liabilities in the consolidated balance sheets.

(3) Included in other long-term liabilities in the consolidated balance sheets.

2022 2021

Weighted-average remaining lease term (years)

Operating leases ......................................

20 21

Finance leases .......................................

17 22

Weighted-average discount rate

Operating leases ......................................

2.26 % 2.16 %

Finance leases .......................................

3.97 % 4.91 %

The components of lease expense, excluding short-term lease costs and sublease income (which were

not material), were as follows:

2022 2021 2020

Operating lease costs

(1)

.................

$ 297 $ 296 $ 252

Finance lease costs:

Amortization of lease assets

(1)

........

1285031

Interest on lease liabilities

(2)

..........

45 37 33

Variable lease costs

(1)

...................

157 151 87

Total lease costs ................

$ 627 $ 534 $ 403

_______________

(1) Included in selling, general and administrative expenses and merchandise costs in the consolidated statements of income.

(2) Included in interest expense and merchandise costs in the consolidated statements of income.

Supplemental cash flow information related to leases was as follows:

2022 2021 2020

Cash paid for amounts included in the

measurement of lease liabilities:

Operating cash flows — operating leases ..

$277$282$258

Operating cash flows — finance leases ....

45 37 33

Financing cash flows — finance leases ....

1766749

Operating lease assets obtained in exchange

for new or modified leases ...................

231 350 354

Financing lease assets obtained in exchange

for new or modified leases ...................

794 399 317

As of August 28, 2022, future minimum payments during the next five fiscal years and thereafter are as

follows:

Operating Leases

(1)

Finance Leases

2023 ....................................................

$ 277 $ 288

2024 ....................................................

256 253

2025 ....................................................

210 280

2026 ....................................................

207 119

2027 ....................................................

186 88

Thereafter ...............................................

2,332 1,191

Total

(2)

...............................................

3,468 2,219

Less amount representing interest ..........................

747 591

Present value of lease liabilities .............................

$ 2,721 $ 1,628

_______________

(1) Operating lease payments have not been reduced by future sublease income of $83.

(2) Excludes $660 of lease payments for leases that have been signed but not commenced.

Note 6—Equity

Dividends

Cash dividends declared in 2022 totaled $3.38 per share, as compared to $12.98 per share in 2021.

Dividends in 2021 included a special dividend of $10.00 per share, aggregating approximately $4,430.

The Company's current quarterly dividend rate is $0.90 per share.

Stock Repurchase Programs

The Company's stock repurchase program is conducted under a $4,000 authorization by the Board of

Directors, which expires in April 2023. As of the end of 2022, the remaining amount available under the

approved plan was $2,808. The following table summarizes the Company’s stock repurchase activity:

Repurchased

(000’s)

Average

Price per

Share Total Cost

2022 ............................................

863 $ 511.46 $ 442

2021 ............................................

1,358 364.39 495

2020 ............................................

643 308.45 198

These amounts may differ from repurchases of common stock in the consolidated statements of cash

flows due to changes in unsettled stock repurchases at the end of each fiscal year. Purchases are made

from time to time, as conditions warrant, in the open market or in block purchases and pursuant to plans

under SEC Rule 10b5-1.

Note 7—Stock-Based Compensation

The Company grants stock-based compensation, primarily to employees and non-employee directors.

Grants to executive officers are generally performance-based. Through a series of shareholder approvals,

there have been amended and restated plans and new provisions implemented by the Company. RSUs

are subject to quarterly vesting upon retirement or voluntary termination. Employees who attain at least

25 years of service with the Company receive shares under accelerated vesting provisions on the annual

vesting date. The 2019 Incentive Plan authorized the issuance of 17,500,000 shares (10,000,000 RSUs)

of common stock for future grants, plus the remaining shares that were available for grant and the future

forfeited shares from grants under the previous plan, up to a maximum aggregate of 27,800,000 shares

(15,885,000 RSUs). The Company issues new shares of common stock upon vesting of RSUs. Shares

for vested RSUs are generally delivered to participants annually, net of shares withheld for taxes.

Summary of Restricted Stock Unit Activity

RSUs granted to employees and to non-employee directors generally vest over five and three years,

respectively. Additionally, the terms of the RSUs, including performance-based awards, provide for

accelerated vesting for employees and non-employee directors who have attained 25 or more and five or

more years of service with the Company, respectively. Recipients are not entitled to vote or receive

dividends on unvested and undelivered shares. At the end of 2022, 10,445,000 shares were available to

be granted as RSUs under the 2019 Incentive Plan.

The following awards were outstanding at the end of 2022:

• 3,328,000 time-based RSUs, which vest upon continued employment or service over specified

periods of time; and

• 121,000 performance-based RSUs, of which 82,000 were granted to executive officers subject to

the determination of the attainment of performance targets for 2022. This determination occurred

in September 2022, at which time at least 33% of the units v ested, as a result of the long service

of all executive officers receiving performance-based RSUs. The remaining awards vest upon

continued employment over specified periods of time.

The following table summarizes RSU transactions during 2022:

Number of

Units

(in 000’s)

Weighted-Average

Grant Date Fair

Value

Outstanding at the end of 2021 .....................................

4,349 $ 257.88

Granted ......................................................

1,679 476.06

Vested and delivered ..........................................

(2,456) 290.18

Forfeited .....................................................

(123) 332.84

Outstanding at the end of 2022 .....................................

3,449 $ 338.41

The weighted-average grant date fair value of RSUs granted was $476.06, $369.15, and $294.08 in 2022,

2021, and 2020, respectively. The remaining unrecognized compensation cost related to non-vested

RSUs at the end of 2022 was $758 and the weighted-average period of time over which this cost will be

recognized is 1.6 years. Included in the outstanding balance at the end of 2022 were approximately

1,210,000 RSUs vested but not yet delivered.

Summary of Stock-Based Compensation

The following table summarizes stock-based compensation expense and the related tax benefits:

2022 2021 2020

Stock-based compensation expense ................

$ 724 $ 665 $ 619

Less recognized income tax benefit .................

154 140 128

Stock-based compensation expense, net .........

$ 570 $ 525 $ 491

Note 8— Taxes

Income Taxes

Income before income taxes is comprised of the following:

2022 2021 2020

Domestic ........................................

$5,759$4,931$4,204

Foreign ..........................................

2,081 1,749 1,163

Total .........................................

$7,840$6,680$5,367

The provisions for income taxes are as follows:

2022 2021 2020

Federal:

Current .......................................

$ 798 $ 718 $ 616

Deferred ......................................

(35) 84 77

Total federal ...............................

763 802 693

State:

Current ......................................

333 265 230

Deferred .....................................

(5) 11 8

Total state ................................

328 276 238

Foreign:

Current ......................................

851 557 372

Deferred .....................................

(17) (34) 5

Total foreign ...............................

834 523 377

Total provision for income taxes .....................

$1,925$1,601$1,308

The reconciliation between the statutory tax rate and the effective rate for 2022, 2021, and 2020 is as

follows:

2022 2021 2020

Federal taxes at statutory rate ...........

$ 1,646 21.0 % $ 1,403 21.0 % $ 1,127 21.0 %

State taxes, net ........................

267 3.4 243 3.6 190 3.6

Foreign taxes, net ......................

231 3.0 92 1.4 92 1.7

Employee stock ownership plan (ESOP) ..

(23) (0.3) (91) (1.3) (24) (0.5)

Other .................................

(196) (2.5) (46) (0.7) (77) (1.4)

Total ..............................

$ 1,925 24.6 % $ 1,601 24.0 % $ 1,308 24.4 %

The Company recognized total net tax benefits of $130, $163 and $81 in 2022, 2021 and 2020. These

include benefits of $94, $75 and $77, related to stock-based compensation. During 2021, there was a net

tax benefit of $70 related to the portion of the special dividend paid through our 401(k) plan.

The components of the deferred tax assets (liabilities) are as follows:

2022 2021

Deferred tax assets:

Equity compensation ..................................

$84$72

Deferred income/membership fees ......................

302 161

Foreign tax credit carry forward .........................

201 146

Operating lease liabilities ...............................

727 769

Accrued liabilities and reserves .........................

694 681

Other ................................................

562

Total deferred tax assets ...................................

2,013 1,891

Valuation allowance .......................................

(313) (214)

Total net deferred tax assets ...............................

1,700 1,677

Deferred tax liabilities:

Property and equipment ................................

(962) (935)

Merchandise inventories ...............................

(231) (216)

Operating lease right-of-use assets ......................

(701) (744)

Foreign branch deferreds ..............................

(85) (92)

Total deferred tax liabilities .................................

(1,979) (1,987)

Net deferred tax liabilities ...........................

$ (279) $ (310)

The deferred tax accounts at the end of 2022 and 2021 include deferred income tax assets of $445 and

$444, respectively, included in other long-term assets; and deferred income tax liabilities of $724 and

$754, respectively, included in other long-term liabilities.

In 2022 and 2021, the Company had valuation allowances of $313 and $214, primarily related to foreign

tax credits that the Company believes will not be realized due to carry forward limitations. The foreign tax

credit carry forwards are set to expire beginning in fiscal 2030.

The Company generally no longer considers fiscal year earnings of non-U.S. consolidated subsidiaries

after 2017 to be indefinitely reinvested (other than China and Taiwan) and has recorded the estimated

incremental foreign withholding taxes (net of available foreign tax credits) and state income taxes payable

assuming a hypothetical repatriation to the U.S. The Company continues to consider undistributed

earnings of certain non-U.S. consolidated subsidiaries, which totaled $2,779, to be indefinitely reinvested

and has not provided for withholding or state taxes.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for 2022 and

2021 is as follows:

2022 2021

Gross unrecognized tax benefit at beginning of year ...........

$33$30

Gross increases—current year tax positions ..............

Gross increases—tax positions in prior years .............

12 2

Gross decreases—tax positions in prior years .............

(12) —

Gross decreases—settlements ..........................

(12) —

Lapse of statute of limitations ...........................

(6) (1)

Gross unrecognized tax benefit at end of year ................

$16$33

The gross unrecognized tax benefit includes tax positions for which the ultimate deductibility is highly

certain but there is uncertainty about the timing of such deductibility. At the end of 2022 and 2021, these

amounts were immaterial. Because of the impact of deferred tax accounting, other than interest and

penalties, the disallowance of these tax positions would not affect the annual effective tax rate but would

accelerate the payment of cash to the taxing authority. The total amount of such unrecognized tax

benefits that if recognized would favorably affect the effective income tax rate in future periods is $15 and

$30 at the end of 2022 and 2021.

Accrued interest and penalties related to income tax matters are classified as a component of income tax

expense. Accrued interest and penalties recognized during 2022 and 2021, and accrued at the end of

each respective period were not material.

The Company is currently under audit by several jurisdictions in the United States and abroad. Some

audits may conclude in the next 12 months, and the unrecognized tax benefits recorded in relation to the

audits may differ from actual settlement amounts. It is not practical to estimate the effect, if any, of any

amount of such change during the next 12 months to previously recorded uncertain tax positions in

connection with the audits. The Company does not anticipate that there will be a material increase or

decrease in the total amount of unrecognized tax benefits in the next 12 months.

The Company files income tax returns in the United States, various state and local jurisdictions, in

Canada, and in several other foreign jurisdictions. With few exceptions, the Company is no longer subject

to U.S. federal, state or local examination for years before fiscal 2018. The Company is currently subject

to examination in California for fiscal years 2013 to present.

Other Taxes

The Company is subject to multiple examinations for value added, sales-based, payroll, product, import or

other non-income taxes in various jurisdictions. In certain cases, the Company has received assessments

from the authorities. Possible losses or range of possible losses associated with these matters are either

immaterial or an estimate of the possible loss or range of loss cannot be made at this time. If certain

matters or a group of matters were to be decided adversely to the Company, it could result in a charge

that might be material to the results of an individual fiscal quarter or year.

Note 9—Net Income per Common and Common Equivalent Share

The following table shows the amounts used in computing net income per share and the weighted

average number of shares of basic and of potentially dilutive common shares outstanding (shares in

000’s):

2022 2021 2020

Net income attributable to Costco ...................

$5,844$5,007$4,002

Weighted average basic shares .....................

443,651 443,089 442,297

RSUs ...........................................

1,106 1,257 1,604

Weighted average diluted shares ....................

444,757 444,346 443,901

Note 10—Commitments and Contingencies

Legal Proceedings

The Company is involved in a number of claims, proceedings and litigations arising from its business and

property ownership. In accordance with applicable accounting guidance, the Company establishes an

accrual for legal proceedings if and when those matters present loss contingencies that are both probable

and reasonably estimable. There may be exposure to loss in excess of amounts accrued. The Company

monitors those matters for developments that would affect the likelihood of a loss (taking into account

where applicable indemnification arrangements concerning suppliers and insurers) and the accrued

amount, if any, thereof, and adjusts the amount as appropriate. The Company has recorded immaterial

accruals with respect to certain matters described below, in addition to other immaterial accruals for

matters not described below. If the loss c ontingency at issue is not both probable and reasonably

estimable, the Company does not establish an accrual, but will continue to monitor the matter for

developments that will make the loss contingency both probable and reasonably estimable. In each case,

there is a reasonable possibility that a loss may be incurred, including a loss in excess of the applicable

accrual. For matters where no accrual has been recorded, the possible loss or range of loss (including

any loss in excess of the accrual) cannot, in the Company's view, be reasonably estimated because,

among other things: (i) the remedies or penalties sought are indeterminate or unspecified; (ii) the legal

and/or factual theories are not well developed; and/or (iii) the matters involve complex or novel legal

theories or a large number of parties.

The Company is a defendant in an action commenced in July 2013 under the California Labor Code

Private Attorneys General Act (PAGA) alleging violation of California Wage Order 7-2001 for failing to

provide seating to employees who work at entrance and exit doors in California warehouses. Canela v.

Costco Wholesale Corp. (Case No. 2013-1-CV-248813; Santa Clara Superior Court). The complaint

seeks relief under the California Labor Code, including civil penalties and attorneys’ fees. The Company

filed an answer denying the material allegations of the complaint. A bench trial was held in June and July;

no decision has been issued.

In June 2022, a business center employee raised similar claims alleging failure to provide seating to

employees who work at membership refund desks in California warehouses and business centers.

Rodriguez v. Costco Wholesale Corp. (Case No. 22CV012847; Alameda Superior Court). The complaint

seeks relief under the California Labor Code, including civil penalties and attorneys' fees. The Company

filed an answer denying the material allegations of the complaint.

In December 2018, a depot employee raised similar claims, alleging that depot employees in California

did not receive suitable seating or reasonably comfortable workplace temperature conditions. Lane v.

Costco Wholesale Corp. (Case No. CIVDS 1908816; San Bernardino Superior Court). The Company filed

an answer denying the material allegations of the complaint. In October 2019, the parties settled for an

immaterial amount the seating claims on a representative basis, which received court approval in

February 2020. The parties settled the temperature claims for an immaterial amount in April 2022, and

court approval was received in May 2022.

In March 2019, employees filed a class action against the Company alleging claims under California law

for failure to pay overtime, to provide meal and rest periods and itemized wage statements, to timely pay

wages due to terminating employees, to pay minimum wages, and for unfair business practices. Relief is

sought under the California Labor Code, including civil penalties and attorneys' fees. Nevarez v. Costco

Wholesale Corp. (Case No. 2:19-cv-03454; C.D. Cal.). The Company filed an answer denying the

material allegations of the complaint. In December 2019, the court issued an order denying class

certification. In January 2020, the plaintiffs dismissed their Labor Code claims without prejudice, and the

court remanded the action to state court. Settlement for an immaterial amount was agreed upon in

February 2021. Final court approval of the settlement was granted on May 3, 2022. A proposed intervenor

has appealed the denial of her motion to intervene.

In May 2019, an employee filed a class action against the Company alleging claims under California law

for failure to pay overtime, to provide itemized wage statements, to timely pay wages due to terminating

employees, to pay minimum wages, and for unfair business practices. Rough v. Costco Wholesale Corp.

(Case No. 2:19-cv-01340; E.D. Cal.). Relief is sought under the California Labor Code, including civil

penalties and attorneys' fees. In September 2021, the court granted Costco’s motion for partial summary

judgment and denied class certification. In August 2019, the plaintiff filed a companion case in state court

seeking penalties under PAGA. Rough v. Costco Wholesale Corp. (Case No. FCS053454; Sonoma

County Superior Court). Relief is sought under the California Labor Code, including civil penalties and

attorneys' fees. The state court action has been stayed pending resolution of the federal action.

In December 2020, a former employee filed suit against the Company asserting collective and class

claims on behalf of non-exempt employees under the Fair Labor Standards Act and New York Labor Law

for failure to pay for all hours worked, failure to pay certain non-exempt employees on a weekly basis, and

failure to provide proper wage statements and notices. The plaintiff also asserted individual retaliation

claims. Cappadora v. Costco Wholesale Corp. (Case No. 1:20-cv-06067; E.D.N.Y.). An amended

complaint was filed, and the Company denied the material allegations of the amended complaint. Based

on an agreement in principle concerning settlement of the matter, involving a proposed payment by the

Company of an immaterial amount, the federal action has been dismissed. In April 2022, Cappadora and

a second plaintiff filed an action against the Company in New York state court asserting the same class

claims asserted in the federal action under the New York Labor Law and seeking preliminary approval of

the class settlement. Cappadora and Sancho v. Costco Wholesale Corp. (Index No. 604757/2022;

Nassau County Supreme Court).

In August 2021, a former employee filed a similar suit, asserting class claims on behalf of certain non-

exempt employees under New York Labor Law for failure to pay on a weekly basis. Umadat v. Costco

Wholesale Corp. (Case No. 2:21-cv-4814; E.D.N.Y.). The Company answered the complaint on October

21, 2021, denying the material allegations. In April 2022, a former employee filed a similar suit, asserting

class claims on behalf of certain non-exempt employees under New York Labor Law, as well as under the

Fair Labor Standards Act, for failure to pay on a weekly basis and failure to pay overtime. Burian v.

Costco Wholesale Corp. (Case No. 2:22-cv-02108; E.D.N.Y.).

In February 2021, a former employee filed a class action against the Company alleging violations of

California Labor Code regarding payment of wages, meal and rest periods, wage statements,

reimbursement of expenses, payment of final wages to terminated employees, and for unfair business

practices. Edwards v. Costco Wholesale Corp. (Case No. 5:21-cv-00716: C.D. Cal.). In May 2021, the

Company filed a motion to dismiss the complaint, which was granted with leave to amend. In June 2021,

the plaintiff filed an amended complaint, which the Company moved to dismiss later that month. The court

granted the motion in part in July 2021 with leave to amend. In August 2021, the plaintiff filed a second

amended complaint and filed a separate representative action under PAGA asserting the same Labor

Code claims and seeking civil penalties and attorneys' fees. The Company filed an answer to the second

amended class action complaint, denying the material allegations. The Company also filed an answer to

the PAGA representative action, denying the material allegations.

In July 2021, a former temporary staffing employee filed a class action against the Company and a

staffing company alleging violations of the California Labor Code regarding payment of wages, meal and

rest periods, wage statements, the timeliness of wages and final wages, and for unfair business practices.

Dimas v. Costco Wholesale Corp. (Case No. STK-CV-UOE-2021-0006024; San Joaquin Superior Court).

The Company has moved to compel arbitration of the plaintiff's individual claims and to dismiss the class

action complaint. On September 7, 2021, the same former employee filed a separate representative

action under PAGA asserting the same Labor Code violations and seeking civil penalties and attorneys'

fees. The case has been stayed pending the motion to compel in the related case.

In September 2021, an employee filed a class action against the Company alleging violations of the

California Labor Code regarding the alleged failure to provide sick pay, failure to timely pay wages due at

separation from employment, and for violations of California's unfair competition law. De Benning v.

Costco Wholesale Corp. (Case No. 34-2021-00309030-CU-OE-GDS; Sacramento Superior Court). The

Company answered the complaint in January 2022, denying its material allegations. In April 2022, a

settlement for an immaterial amount was agreed upon, subject to court approval.

In March 2022, an employee filed a class action against the Company alleging violations of the California

Labor Code regarding the failure to: pay wages, provide meal and rest periods, provide accurate wage

statements, timely pay final wages, and reimburse business expenses. Diaz v. Costco Wholesale Corp.

(Case No. 22STCV09513; Los Angeles Superior Court). The Company filed an answer denying the

material allegations.

In May 2022, an employee filed a PAGA-only representative action against the Company alleging claims

under the California Labor Code regarding the payment of wages, meal and rest periods, the timeliness of

wages and final wages, wage statements, accurate records and business expenses. Gonzalez v. Costco

Wholesale Corp. (Case No. 22AHCV00255; Los Angeles Superior Court).

Beginning in December 2017, the United States Judicial Panel on Multidistrict Litigation consolidated

numerous cases concerning the impacts of opioid abuses filed against various defendants by counties,

cities, hospitals, Native American tribes, third-party payors, and others. In re National Prescription Opiate

Litigation (MDL No. 2804) (N.D. Ohio). Included are cases that name the Company, including actions filed

by counties and cities in Michigan, New Jersey, Oregon, Virginia and South Carolina, a third-party payor

in Ohio, and a hospital in Texas, class actions filed on behalf of infants born with opioid-related medical

conditions in 40 states, and class actions and individual actions filed on behalf of individuals seeking to

recover alleged increased insurance costs associated with opioid abuse in 43 states and American

Samoa. Claims against the Company in state courts in New Jersey, Oklahoma, Utah, and Arizona have

been dismissed. The Company is defending all of the pending matters.

Members of the Board of Directors, six corporate officers and the Company are defendants in a

shareholder derivative action related to chicken welfare and alleged breaches of fiduciary duties. Smith, et

ano. v. Vachris, et al., Superior Court of the State of Washington, County of King, No, 22-2-08937-7SEA,

(filed 6/14/22, as amended, 6/30/22); The complaint seeks from the individual defendants damages,

injunctive relief, costs, and attorneys' fees. A motion to dismiss the amended complaint has been filed.

The Company does not believe that any pending claim, proceeding or litigation, either alone or in the

aggregate, will have a material adverse effect on the Company’s financial position, results of operations or

cash flows; it is possible that an unfavorable outcome of some or all of the matters, however unlikely,

could result in a charge that might be material to the results of an individual fiscal quarter or year.

Note 11—Segment Reporting

The Company is principally engaged in the operation of membership warehouses through wholly owned

subsidiaries in the U.S., Canada, Mexico, Japan, U.K., Korea, Taiwan, Australia, Spain, France, China,

and Iceland. Reportable segments are largely based on management’s organization of the operating

segments for operational decisions and assessments of financial performance, which considers

geographic locations. The material accounting policies of the segments are as described in Note 1. Inter-

segment net sales and expenses have been eliminated in computing total revenue and operating income.

Effective for fiscal 2022, stock-based compensation was allocated to the segments in this reporting. This

change reflected a decision to evaluate the financial performance of the segments inclusive of this

expense. Operating income was restated in each of the segments for all prior periods to reflect this

change.

The following table provides information for the Company's reportable segments:

United States Canada

Other

International Total

2022

Total revenue ..............................

$ 165,294 $ 31,675 $ 29,985 $ 226,954

Operating income ..........................

5,268 1,346 1,179 7,793

Depreciation and amortization ...............

1,436 180 284 1,900

Additions to property and equipment ..........

2,795 388 708 3,891

Property and equipment, net .................

17,205 2,459 4,982 24,646

Total assets ...............................

44,904 6,558 12,704 64,166

2021

Total revenue ..............................

$ 141,398 $ 27,298 $ 27,233 $ 195,929

Operating income ..........................

4,470 1,093 1,145 6,708

Depreciation and amortization ...............

1,339 177 265 1,781

Additions to property and equipment ..........

2,612 272 704 3,588

Property and equipment, net .................

15,993 2,317 5,182 23,492

Total assets ...............................

39,589 5,962 13,717 59,268

2020

Total revenue ..............................

$ 122,142 $ 22,434 $ 22,185 $ 166,761

Operating income ..........................

3,822 778 835 5,435

Depreciation and amortization ...............

1,248 155 242 1,645

Additions to property and equipment ..........

2,060 258 492 2,810

Property and equipment, net .................

14,916 2,172 4,719 21,807

Total assets ...............................

38,366 5,270 11,920 55,556

Disaggregated Revenue

The following table summarizes net sales by merchandise category; sales from e-commerce websites

and business centers have been allocated to the applicable merchandise categories:

2022 2021 2020

Foods and Sundries .........................

$ 85,629 $ 77,277 $ 68,659

Non-Foods .................................

61,100 55,966 44,807

Fresh Foods ................................

29,527 27,183 23,204

Warehouse Ancillary and Other Businesses .....

46,474 31,626 26,550

Total net sales ............................

$ 222,730 $ 192,052 $ 163,220

Item 9—Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A—Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities

Exchange Act of 1934, as amended) are designed to ensure that information required to be disclosed in

the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and

reported within the time periods specified in the rules and forms of the SEC and to ensure that information

required to be disclosed is accumulated and communicated to management, including our principal

executive and financial officers, to allow timely decisions regarding disclosure. The Chief Executive

Officer and the Chief Financial Officer, with assistance from other members of management, have

reviewed the effectiveness of our disclosure controls and procedures as of August 28, 2022, and, based

on their evaluation, have concluded that the disclosure controls and procedures were effective as of such

date.

Management's Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial

reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial

reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and

the preparation of financial statements for external purposes in accordance with U.S. GAAP and includes

those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail

accurately and fairly reflect our transactions and the dispositions of our assets; (2) provide reasonable

assurance that our transactions are recorded as necessary to permit preparation of financial statements

in accordance with generally accepted accounting principles and that our receipts and expenditures are

being made only in accordance with appropriate authorizations; and (3) provide reasonable assurance

regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that

could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect

misstatements. Projections of any evaluation of effectiveness for future periods are subject to the risk that

controls may become inadequate because of changes in conditions, or that the degree of compliance with

the policies or procedures may deteriorate.

Under the supervision of and with the participation of our management, we assessed the effectiveness of

our internal control over financial reporting as of August 28, 2022, using the criteria set forth by the

Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated

Framework (2013).

Based on its assessment, management has concluded that our internal control over financial reporting

was effective as of August 28, 2022. The attestation of KPMG LLP, our independent registered public

accounting firm, on the effectiveness of our internal control over financial reporting is included with the

consolidated financial statements in Item 8 of this Report.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f)

or 15d-15(f) of the Exchange Act) that occurred during the fourth quarter of 2022 that have materially

affected, or are reasonably likely to materially affect, the Company’s internal control over financial

reporting.

Item 9B—Other Information

None.

Item 9C—Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not Applicable.

PART III

Item 10—Directors, Executive Officers and Corporate Governance

Information relating to the availability of our code of ethics for senior financial officers and a list of our

executive officers appear in Part I, Item 1 of this Report. The information required by this Item concerning

our directors and nominees for director is incorporated herein by reference to the sections entitled

“Proposal 1: Election of Directors,” “Directors” and “Committees of the Board” in Costco’s Proxy

Statement for its 2023 annual meeting of shareholders, which will be filed with the SEC within 120 days of

the end of our fiscal year (“Proxy Statement”).

Item 11—Executive Compensation

The information required by this Item is incorporated herein by reference to the sections entitled

“Compensation of Directors,” “Executive Compensation,” and “Compensation Discussion and Analysis” in

Costco’s Proxy Statement.

Item 12—Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters

The information required by this Item is incorporated herein by reference to the section entitled “Principal

Shareholders” and “Equity Compensation Plan Information” in Costco’s Proxy Statement.

Item 13—Certain Relationships and Related Transactions, and Director Independence

The information required by this Item is incorporated herein by reference to the sections entitled “Proposal

1: Election of Directors,” “Directors,” “ Committees of the Board,” “Shareholder Communications to the

Board,” “Meeting Attendance,” “Report of the Compensation Committee of the Board of Directors,”

“Certain Relationships and Transactions” and “Report of the Audit Committee” in Costco’s Proxy

Statement.

Item 14—Principal Accounting Fees and Services

Our independent registered public accounting firm is KPMG LLP, Seattle, WA, Auditor Firm ID: 185.

The information required by this Item is incorporated herein by reference to the sections entitled

“Independent Public Accountants” in Costco’s Proxy Statement.

PART IV

Item 15—Exhibits, Financial Statement Schedules

(a) Documents filed as part of this report are as follows:

1. Financial Statements:

See the listing of Financial Statements included as a part of this Form 10-K in Item 8 of

Part II.

2. Financial Statement Schedules:

All schedules have been omitted because the required information is not present or is not

present in amounts sufficient to require submission of the schedule, or because the

information required is included in the consolidated financial statements, including the

notes thereto.

(b) Exhibits: The required exhibits are filed as part of this Annual Report on Form 10-K or are

incorporated herein by reference.

3.1

Articles of Incorporation as

amended of Costco Wholesale

Corporation

3.2

Bylaws as amended of Costco

Wholesale Corporation

10-Q 5/8/2022 6/2/2022

4.1

First Supplemental Indenture

between Costco Wholesale

Corporation and U.S. Bank

National Association, as Trustee,

dated as of March 20, 2002

(incorporated by reference to

Exhibits 4.1 and 4.2 to the

Company's Current Report on the

Form 8-K filed on March 25, 2002)

8-K 3/25/2002

4.2

Form of 1.375% Senior Notes due

June 20, 2027

8-K 4/17/2020

4.3

Form of 1.600% Senior Notes due

April 20, 2030

8-K 4/17/2020

4.4

Form of 1.750% Senior Notes due

April 20, 2032

8-K 4/17/2020

4.5

Form of 2.300% Senior Notes due

May 18, 2022

8-K 5/16/2017

4.6

Form of 2.750% Senior Notes due

May 18, 2024

8-K 5/16/2017

4.7

Form of 3.000% Senior Notes due

May 18, 2027

8-K 5/16/2017

4.8

Description of Common Stock

10.1*

Costco Wholesale Executive

Health Plan

10-K 9/2/2012 10/19/2012

10.2*

2019 Incentive Plan

DEF 14 12/17/2019

10.3*

Seventh Restated 2002 Stock

Incentive Plan

DEF 14A 12/19/2014

10.3.1*

2019 Stock Incentive Plan

Restricted Stock Unit Award

Agreement-Employee

10-Q 11/24/2019 12/23/2019

10.3.2*

2019 Stock Incentive Plan

Restricted Stock Unit Award

Agreement - Non-U.S. Employee

10-Q 11/24/2019 12/23/2019

Incorporated by Reference

Exhibit

Number

Exhibit Description

Filed

Herewith

Form Period Ended Filing Date

10.3.3*

2019 Stock Incentive Plan

Restricted Stock Unit Award

Agreement-Non-Executive

Director

10-Q 11/24/2019 12/23/2019

10.3.4*

2019 Stock Incentive Plan Letter

Agreement for 2020 Performance-

Based Restricted Stock Units-

Executive

10-Q 11/24/2019 12/23/2019

10.4*

Fiscal 2022 Executive Bonus Plan

8-K 11/10/2021

10.5*

Executive Employment

Agreement, effective January 1,

2017, between W. Craig Jelinek

and Costco Wholesale

Corporation

10-Q 11/20/2016 12/16/2016

10.5.1*

Extension of the Term of the

Executive Employment

Agreement, effective January 1,

2019, between W. Craig Jelinek

and Costco Wholesale

Corporation

10-Q 11/25/2018 12/20/2018

10.5.2*

Extension of the Term of the

Executive Employment

Agreement, effective January 1,

2020, between W. Craig Jelinek

and Costco Wholesale

Corporation

10-Q 11/24/2019 12/23/2019

10.5.3* Extension of the Term of the

Executive Employment

Agreement, effective January 1,

2021, between W. Craig Jelinek

and Costco Wholesale

Corporation

10-Q 11/22/2020 12/16/2020

10.5.4* Extension of the Term of the

Executive Employment

Agreement, effective January 1,

2022, between W. Craig Jelinek

and Costco Wholesale

Corporation

10-Q 11/22/2021 12/22/2021

10.6

Form of Indemnification

Agreement

14A 12/13/1999

10.7*

Deferred Compensation Plan

10-K 9/1/2013 10/16/2013

10.8**

Citibank, N.A. Co-Branded Credit

Card Agreement

10-Q/A 5/10/2015 8/31/2015

10.8.1**

First Amendment to Citi, N.A. Co-

Branded Credit Card Agreement

10-Q 11/22/2015 12/17/2015

10.8.2**

Second Amendment to Citi, N.A.

Co-Branded Credit Card

Agreement

10-Q 2/14/2016 3/9/2016

10.8.3**

Third Amendment to Citi, N.A. Co-

Branded Credit Card Agreement

10-K 8/28/2016 10/12/2016

Incorporated by Reference

Exhibit

Number

Exhibit Description

Filed

Herewith

Form Period Ended Filing Date

10.8.4**

Fourth Amendment to Citi, N.A.

Co-Branded Credit Card

Agreement

10-Q 2/18/2018 3/15/2018

10.8.5**

Fifth Amendment to Citi, N.A. Co-

Branded Credit Card Agreement

10-Q 2/17/2019 3/13/2019

10.8.6**

Sixth Amendment to Citi, N.A. Co-

Branded Credit Card Agreement

10-K 9/1/2019 10/11/2019

10.8.7** Seventh Amendment to Citi, N.A.

Co-Branded Credit Card

Agreement

10-Q 2/14/2021 3/10/2021

10.8.8**

Eighth Amendment to Citi, N.A.

Co-Branded Credit Card

Agreement

10-Q 2/13/2022 3/10/2022

21.1

Subsidiaries of the Company

23.1

Consent of Independent

Registered Public Accounting Firm

31.1

Rule 13a – 14(a) Certifications

32.1

Section 1350 Certifications

101.INS

Inline XBRL Instance Document

101.SCH

Inline XBRL Taxonomy Extension

Schema Document

101.CAL

Inline XBRL Taxonomy Extension

Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension

Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension

Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension

Presentation Linkbase Document

104

Cover Page Interactive Data File

(formatted as inline XBRL and

contained in Exhibit 101)

Incorporated by Reference

Exhibit

Number

Exhibit Description

Filed

Herewith

Form Period Ended Filing Date

_____________________

* Management contract, compensatory plan or arrangement.

** Portions of this exhibit have been omitted under a confidential treatment order issued by the Securities and Exchange

Commission.

Item 16—Form 10-K Summary

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant

has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

October 4, 2022

COSTCO WHOLESALE CORPORATION

(Registrant)

/s/ RICHARD A. GALANTI

Richard A. Galanti

Executive Vice President, Chief Financial Officer

and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below

by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

October 4, 2022

/s/W.CRAIG JELINEK

/s/ HAMILTON E. JAMES

W. Craig Jelinek

Chief Executive Officer and Director

Hamilton E. James

Chairman of the Board

/s/ RICHARD A. GALANTI

/s/ DANIEL M. HINES

Richard A. Galanti

Executive Vice President, Chief Financial

Officer and Director

(Principal Financial Officer)

Daniel M. Hines

Senior Vice President and Corporate

Controller

(Principal Accounting Officer)

/s/ RON M. VACHRIS

/s/ SUSAN L. DECKER

Ron M. Vachris

President, Chief Operating Officer and

Director

Susan L. Decker

Director

/s/ KENNETH D. DENMAN

/s/ SALLY JEWELL

Kenneth D. Denman

Director

Sally Jewell

Director

/s/ CHARLES T. M UNGER

/s/ JEFFREY S. RAIKES

Charles T. Munger

Director

Jeffrey S. Raikes

Director

/s/ JOHN W. STANTON

/s/ MARY (MAGGIE) A. WILDEROTTER

John W. Stanton

Director

Mary (Maggie) A. Wilderotter

Director

DIRECTORS AND OFFICERS

BOARD OF DIRECTORS

Susan L. Decker

(

)

Charles T. Mun er

(

)

CEO and Founder, Raftr;

Former President, Yahoo! Inc.

Kenneth D. Denman

(

)(

)

Jeffre S. Raikes

(

)

Vice Chairman of the Board, Costco Wholesale;

General Partner, Sway Ventures; Former President

and Chief Executive Officer, Emotient, Inc.

John W. Stanton

(

)

Richard A. Galanti

Executive Vice President and

Chief Financial Officer, Costco Wholesale

Ron M. Vachris

Hamilton E. James

Chairman of the Board, Costco Wholesale;

Maggie A. Wilderotter(b)(c)

Chairman, Jefferson River Capital;

Former Executive Vice Chairman, The Blackstone Group

W. Crai Jelinek

Board Committees

Chief Executive Officer, Costco Wholesale

(a) Audit Committee

Sall Jewell

(

)(

)

(b) Compensation Committee

Former Interim CEO, The Nature Conservancy; Former Secretary of

the Interior; Former CEO and Director, Recreational Equipment Inc.

*2022 Committee Chair

EXECUTIVE AND SENIOR OFFICERS

Jeffre Abadir

James P. Mur

h**

Senior Vice President, General Mana er - Ba Area Re ion

Executive Vice President, COO - International Division

Claudine Adamo** Robert E. Nelson III

Executive Vice President, COO - Merchandising Senior Vice President, Treasury, Financial Planning & Investor

Relations

Marc-Andre Bally

Senior Vice President, General Mana er - Eastern Canada Re ion Pietro Nenci

Patrick J. Callans** Senior Vice President, Merchandising - Corporate Foods, Non-Foods

& Ecommerce, Canada

Executive Vice President, Administration

Greg Carter II Mario Omoss

Senior Vice President, General Mana er, Los An eles Re ion Senior Vice President, General Mana er - Northwest Re ion

Richard Chan Robert Parker

Senior Vice President, General Mana er - Asia Senior Vice President, Business Centers

Jeffre Cole Mike Parrott

Senior Vice President, Costco Wholesale Industries & Senior Vice President, Ecommerce

Business Develo

ment Pierre Riel**

Wend Davis Executive Vice President, COO - International Division

Senior Vice President, General Mana er - Southeast Re ion Yoram B. Rubanenko**

Gino Dorico Executive Vice President, COO - Eastern Division

Senior Vice President, Countr Mana er - Canada Adam Self

Caton Frates** Senior Vice President, General Mana er - Northeast Re ion

Executive Vice President, COO - Southwest Division Walt Shafer

Richard A. Galanti** Senior Vice President, General Mana er - Lincoln Premium Poultr

Executive Vice President and Chief Financial Officer Geoff Shave

Sarah Geor e Senior Vice President, Merchandisin , Non-Foods

Senior Vice President, Merchandisin - Fresh Foods

Darb Greek

Senior Vice President, General Mana er - Texas Re ion

Nanc Griese

Senior Vice President, Merchandisin - Foods & Sundries John Sullivan**

Daniel M. Hines Executive Vice President, General Counsel & Cor

orate Secretar

Senior Vice President, Cor

orate Controller John D. Thelan

W. Crai Jelinek** Senior Vice President, De

ots & Traffic

Chief Executive Officer Sand

Torre

Teresa Jones Senior Vice President, Membership, Marketing, Member Service

Centers and Travel

Senior Vice President, De

ots & Traffic

Yoon Kim Ron M. Vachris**

Senior Vice President, Merchandisin - Non-Foods President & Chief O

eratin Officer

James Klauer** Azmina Virani

Executive Vice President, COO - Northern Division Senior Vice President, General Mana er - Western Canada Re ion

William Koza Brenda Weber

Senior Vice President, General Mana er - Midwest Re ion Senior Vice President, Human Resources

David Messner W. Richard Wilcox

Senior Vice President, Real Estate Develo

ment Senior Vice President, General Mana er - San Die o Re ion

uss Miller** Terr Williams

Senior Executive Vice President, COO - Warehouse Operations,

U.S. & Mexico

Senior Vice President, CIO - Information Technolo

Ali Moa

eri

** Executive Committee Member

Senior Vice President, Construction & Purchasin

gg g

Louie Silveira

Senior Vice President, General Mana er - Euro

Richard Ste

hens

Senior Vice President, Pharma

ggg

Vice Chairman of the Board, Berkshire Hathaway Inc.;

Director, Daily Journal Corporation

Co-Founder, The Raikes Foundation;

Former CEO, Bill and Melinda Gates Foundation

Chairman, First Avenue Entertainment LLLP;

Trilogy International Partners, Inc. and Trilogy Equity Partners

President and Chief Operating Officer, Costco Wholesale

CEO and Chairman, Grand Reserve Inn;

Former Executive Chairman, Frontier Communications

VICE PRESIDENTS

Kim Alexander - GMM, Corporate Non-Foods Jim Harrison - Transportation Giro Rizzuti - GMM, Non-Foods, Canada

Michael Anderson - Information Technology David Harruff - Operations, Northwest Kathy Robinson - Costco Travel

James Andruski - GMM, Foods & Sundries, W. Canada Timothy Haser - Information Technology Jeanne Rosolino - Operations, San Diego

Kathleen Ardourel - Information Technology John Hickey - GMM, Foods & Sundries, Southeast Region Jason Rothman - Assistant Corporate Controller

Elizabeth Arellano - Operations, Los Angeles Doug Holbrook - Deli, Meat & Produce Operations Chris Rylance - Information Technology

Tiffany Barbre - Assistant Corporate Controller Scott Howe - Assistant Corporate Controller Moises Saenz - Country Manager, Mexico

Patty Bauer - Information Technology Ross Hunt - Administration, Canada Drew Sakuma - Operations, Bay Area

Patrick Bergeron - Operations, Southeast Bob Huskey - GMM, Produce Art Salas - U.S. Optical

Christopher Bolves - Operations, Northwest Jeff Ishida - Real Estate, Eastern Division Scott Schruber - Operations, U.K.

Kimberly Brown - Operations, Texas Scott Jacobs - Costco Logistics David Sherwood - Finance & Investor Relations

Jon Bubitz - GMM, Corporate Non-Foods Tony Jaswal - Risk Management Scott Sims - Operations, Business Centers

Elaina Budge - GMM, Foods & Sundries, Bay Area Steven Jewer - GMM, Foods & Sundries, E. Canada David Skinner - Human Resources, Canada

Paul Cano - Operations, Bay Area Anna Johnston - Information Technology Cheryl Smeby - GMM, Corporate Non-Foods

Michael Casebier - Operations, Texas Peter Kelly - Country Manager, U.K. & Iceland Adrian Smith - GMM, Fresh Foods, Canada

Walter Chao - Regional Manager, Taiwan Jim Kenyon - GMM, Foods & Sundries, Midwest Dick Snyder - Operations, Midwest

Angelina Chaparro - Operations, Los Angeles Ken Kimble - GMM, Corporate Foods & Sundries Chad Sokol - GMM, Corporate Foods & Sundries

Frank Chislette - Ancillary & Other Business, Canada Robert Leiss - Operations, Los Angeles Darby Sorber

- GMM, Foods & Sundries, Northeast

Mike Cho - Country Manager, Korea Torsten Lubach - Information Technology Joseph Stanovcak - Operations, San Diego

Don Coleman - Information Technology Steve Mantanona - GMM, Merchandising, Mexico Cathy Tabor - Information Technology

Michael Cotton - Operations, Northwest Randy Martel - Operations, E. Canada Mauricio Talayero - CFO, Mexico

Joel Crabb - Information Technology Mark Mattis - Information Technology Ken Theriault - Country Manager, Japan

Ben Culver - Fuel & Car Wash Tracy Mauldin-Avery - GMM, Foods & Sundries, San Diego Brian Thomas - Operations, Los Angeles

Anthony Dattilo - Costco Logistics

Susan McConnaha - Community Relations, Journeys,

Diversity & Inclusion

H. Keith Thompson - Construction

Dennis Davenport - Operations, Los Angeles Daniel McMurray - Operations, Midwest Michael Thompson - Operations, W. Canada

Chris Davis - Operations, Midwest

Erin Medved-Burnham - GMM, Corporate Foods &

Sundries

Todd Thull - Construction

Russ Decaire - GMM, Foods & Sundries, Northwest Leah Monica - Member Service Centers Adrian Thummler - Operations, Mexico

Peter Del Grosso - GMM, Non-Foods, Canada Joe Moore - Corporate Tax Chris Tingman - GMM, International

Guy Delmonte - Operations, Southeast Robert Murvin - GMM, Foods & Sundries, Texas Kevin Trejo - Operations, Bay Area

Jeff Elliott - Treasurer Keith Neal - GMM, Meat Gail Tsuboi - Legal

Debbie Ells - GMM, Non-Foods, Canada Jim Nelson - GMM, Corporate Non-Foods Diane Tucci - Country Manager, Spain

Liz Elsner - Ecommerce Patrick Noone - Country Manager, Australia & New Zealand Howard Tulk - Operations, Japan

Tom Feely - Operations, Southeast Scott O'Brien - GMM, Corporate Foods & Sundries Tony Unan - Legal, International

Sheri Flies - Global Sustainability & Compliance Eric Orren - Real Estate Mick Wendell - Construction

Anthony Fontana - Operations, Northeast

Frank Padilla - GMM, Bakery, Service Deli & Food Court Randy White - Construction

Alison Francis - Chief Diversity Officer Thomas Padilla - Operations, Northwest Jill Whittaker - Operations, San Diego

Jack Frank - Real Estate, Western Division Daniel Parent - Operations, E. Canada Janet Wiebke - GMM, Corporate Non-Foods

Joseph Grachek III - Internal Audit Fred Paulsell - Corporate Purchasing Craig Wilson - Food Safety & Quality Assurance

Kevin Green - Operations, Midwest Larry Pifer - GMM, Fresh Foods, Canada Earl Wiramanaden - GMM, Fresh Foods, International

Tim Griffith - Ecommerce Operations Nevin Pottinger - Operations, W. Canada Mary Carmen Zamudio - GMM, Merchandising, Mexico

Martin Groleau - GMM, Ecommerce Marketing,

Operations & Logistics, Canada

Paul Pulver - Operations, Northeast Jason Zapp - GMM, Non-Foods, Canada

Peter Gruening - Membership & Marketing Sarah Rajski - Human Resources Karim Zeffouini - Operations, Northeast

Bradley Hanna - Pharmacy Harish Rao - Information Technology

Eric Harris - Warehouse Operations & Facilities Jon Raper - Information Technology

ADDITIONAL INFORMATION

Shareholder Information

Copies of Costco's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q will be provided to any

shareholder upon written request to Investor Relations, Costco Wholesale Corporation, 999 Lake Drive, Issaquah,

Washington 98027. Internet users can access recent sales and earnings releases, the annual report and SEC filings,

as well as our Costco website, at http://www.costco.com. E-mail users can direct their investor relations questions to

[email protected]. The SEC maintains a site that contains reports, proxy and information statements, and other

information regarding issuers, such as the Company, that file electronically with the SEC at www.sec.gov.

Annual Meeting

Thursday, January 19, 2023 at 2:00 PM Pacific

www.virtualshareholdermeeting.com/COST2023

Independent Public Accountants

KPMG LLP

401 Union Street, Suite 2800

Seattle, WA 98101

Stock Exchange Listing

The Nasdaq Global Select Market

Stock Symbol: COST

Transfer Agent

Computershare

Costco Shareholder Relations

Correspondence should be mailed to:

P.O. Box 43006

Providence RI 02940

Overnight correspondence should be sent to:

150 Royall St., Suite 101

Canton, MA 02021

Telephone: (800) 249-8982

TDD for Hearing Impaired: (800) 490-1493

Outside U.S.: (201) 680-6578

Website: https://www.computershare.com/investor

OR000075_0822

A commitment to quality and value at

847 locations and on Costco.com