Costco doesn’t publish its margin caps but, by looking through the company’s 2014 financial statements, we can see that for the past five years, their margins have held steady at about 10.6%. This means that for every $100 that Costco spends to buy its products, it’s selling them, on average, for $110.60.
The word average is important in that explanation. Costco has its own brand, Kirkland Signature, that does surprisingly well for a store brand. This label, obviously, earns a higher profit as there are less middlemen involved and Costco can charge a higher mark-up to account for its lower cost of obtaining the products. The 10.6% average mark-up therefore, includes the higher margins on Kirkland Signature brands meaning that a name brand product will sell for an even smaller margin than the 10.6% average. This is how Costco maintains its low prices: it makes virtually no money by selling name brand products.
