According to the Complaint, Costco engages in the operation of membership warehouses in the United States
(U.S.) and Puerto Rico, Canada, United Kingdom (U.K.), Mexico, Japan, Australia, Spain, France, Iceland and through majority-owned subsidiaries in Taiwan and Korea. As of September 3, 2017, Costco operated 741 warehouses worldwide. Through the membership warehouses, Costco aims at offering low prices on a limited selection of national products in certain categories to produce high sales volumes and rapid inventory turnover.
The Complaint alleges that Costco misrepresented and failed to disclose adverse facts pertaining to the Company’s business, operations, and prospects, which were known to Defendants or recklessly disregarded by them. Specifically, Defendants failed to disclose that: (i) Costco lacked effective internal control over financial reporting; (ii) as a result of the foregoing, Defendants’ statements about Costco’s business, operations, and prospects, were false and misleading and/or lacked a reasonable basis.