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Costco stays true to off-price formula

New York — Costco president and ceo Jim Sinegal refuted the notion that the retailer could raise prices slightly and its customers wouldn't notice, as was suggested at yesterday's Goldman Sachs Global Retailing Conference here.

"The reason customers shop with us is for our quality and that we drive such a hard bargain. We could start to raise prices, but in my view that's a mistake for our business in the long term."

Costco is also known for quality, he said, whether it's fine wines, chickens or another product category. Though it has a strong private-label program, 85 percent of its merchandise is national brands. "That's what we're known for — highly-sought-after brands." Within the past year, Costco has added new direct relationships with such manufacturers as Nautica, Ralph Lauren Home, Royal Sateen and Kitchen Aid.

With 394 warehouses averaging $102 million in sales and 135,000 square feet each, Costco will add 59 units within two years, though the majority will be in existing markets, said Richard Galanti, executive vp and cfo.

Costco also just opened its second two-story unit in the United States, in Port Chester, NY. A two-story unit is essential where real estate is scarce, Sinegal said. "It's a costly way to do business" but necessary if it wants to get into those markets.

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