Costco Canada Inc. & Costco Wholesale Corp.

Alden Greenhouse, David Schroeder/ 416-593-5577 ext.2281, ext.2232 / e-mail: agreenhouse@dbrs.com

DBRS is confirming the corporate rating of Costco Wholesale Corporation Inc. ("Costco" or "the Company"), at A (high) with a Stable trend. The commercial paper of the Company’s subsidiary, Costco Canada Inc., is confirmed at R-1 (middle) with a Stable trend and its corporate rating is confirmed at A (high) with a Stable trend, based upon the unconditional guarantee of the parent.

The confirmations reflect several factors: (1) With the expectation of a softening North American economy, Costco is better positioned than most retailers due to: (a) the Company’s high percentage of food sales and the basic nature of its non-food items means it should be less influenced by the economy; and (b) its high inventory turnover and short lead time for orders, which allows for easier inventory management and gives the Company the ability to scale back quickly. (2) The Company has a strong balance sheet with low debt levels and good liquidity. Coverage ratios remain very strong. (3) The Company has developed strong long-term sales and earnings growth trends due to new ancillary offerings, new stores, and traditionally high (double digit) same store sales growth, which is expected to remain strong but taper slightly as the bulk of stores now have established client bases. Despite a slight weakening in EBITDA in the most recent period due to more new stores (with higher expense ratios), increased low-margin gasoline sales, and the introduction of a new loyalty program, EBITDA is expected to continue its strong growth in the long term as new stores mature and innovative merchandising allows the Company to continue increasing the average transaction value. The growth may be slightly muted compared to past trends, however, as Costco has recently begun to enter markets traditionally served by competitors. (4) Costco averages $101 million in sales per warehouse, compared with competitors in the $45 million - 60 million range due to higher price points for its merchandise and slightly larger stores. This gives the Company a significant cost advantage. (5) The food retail segment, from which Costco derives more than 50% of sales is becoming more competitive. While the Company has always competed with traditional food retailers (historically a very fragmented and non-price-competitive market), it has been able to differentiate itself as a low price, basic retailer. Various discount retailers have added food retail sections to new and existing stores, which will compete more directly with Costco.