The Only Company Wal-Mart Fears (Fortune)

[coda]

COSTCO
The Only Company Wal-Mart Fears
Nobody runs warehouse clubs better than Costco, where shoppers can’t resist luxury products at bargain prices.


By John Helyar


In the world of retailing, Wal-Mart is the unstoppable, insatiable force. With $247 billion in revenues—and growing 15% a year—it reduces downtown shop owners to quivering jelly and once-formidable competitors, like Kmart, to bankruptcy. Wal-Mart CEO Lee Scott rules the commercial strip the way Julius Caesar once ruled the Roman republic.

Except, that is, for a solitary rebel-held province where a company 20% the size of Wal-Mart has made a monkey of the 800-pound gorilla. In the retail niche of warehouse clubs, the irresistible force is an irresolute flailer. During the past ten years Wal-Mart has gone through five CEOs and countless stratagems at Sam's Club trying to assume its customary command. All have been thwarted by Costco Wholesale, the master of the cavernous space.


<snip>


James D. Sinegal, the president and CEO of Costco, has no palace guard and no profile to speak of, particularly compared to a retail legend like Sam Walton. Yet he's the guy who in 20 years has taken Costco from a startup to the FORTUNE 50 using, as surely as Mr. Sam, highly distinctive practices. He caps Costco's markups at 14% (department store markups can reach 40%). He offers the best wages and benefits in retail (full-time hourly workers make $40,000 after four years). He gives customers blanket permission for returns: no receipts; no questions; no time limits, except for computers—and even then the grace period is six months.

But some of the practices that made Costco great have lately come under attack by Wall Street. The company's margins have been squeezed by rising labor costs and by Sam's latest run at its nemesis. Costco has twice reduced its earnings outlook this year; after the second warning, in August, its stock dropped 21%, to $29. For the fiscal year ended Aug. 31, Costco's earnings rose 3%, to $721 million, on a 10% rise in revenues. The stock has climbed into the mid-30s, though it's well below its all-time high of $58 in May 2000. Analysts have pounded on Sinegal to trim the company's generous health benefits and to otherwise reduce labor costs. But he's taken only limited steps in that direction, like modestly increasing employees' share of health-insurance premiums. That doesn't satisfy critics like Deutsche Bank analyst Bill Dreher, who recently wrote, "Costco continues to be a company that is better at serving the club member and employee than the shareholder."

Sinegal just shrugs. "You have to take the shit with the sugar, I guess. We think when you take care of your customer and your employees, your shareholders are going to be rewarded in the long run. And I'm one of them ; I care about the stock price. But we're not going to do something for the sake of one quarter that's going to destroy the fabric of our company and what we stand for."





more....

http://www.fortune.com/fortune/investing/articles/0,15114,538834,00.html

[WindRavenX]

1. Walmart is evil

However,I shop at Target, which from what I know pays employees better and gives health benifits. But I admit I am ignorant sometimes, and I hope that it's ok to shop at Target...

[wakfs]

2. Almost makes me want to join Costco

I love this quote:

"I care about the stock price. But we're not going to do something for the sake of one quarter that's going to destroy the fabric of our company and what we stand for."

I've never heard a CEO talk like that. It's quite refreshing.

[rwheeler31]

3. The only place I've seen a Costco was in San Francisco

a great city but how do we get these operations in our states.

[Salviati]

6. They are expanding...

My parents just got one near them in Minnesota in the past year or two. My mom has switched from going to Sams club to going to Costco exclusively...

[MooPie]

4. Costco is great!

I go there almost every weekend because they give out all kinds of food samples. That way I get my weekly fix of bad foods like corn dogs, and pastries, and cheesecake, and pasta, and buffalo chicken tenders. It's a great place for lunch! I also buy things too, just because I feel guilty that they're feeding me. Oh, and the people who work there are very nice.

[RC]

5. What a novel concept.

"Costco continues to be a company that is better at serving the club member and employee than the shareholder."

Employees and customers first, before the money grubbers.

[frustrated_lefty]

7. My wife swore by CostCo

in California, and I have to admit the company never sacrificed quality in any of its merchandise. Comparing costs with Albertsons and Vons, we saved close to %50 on food alone

[Lorien]

10. Their "Kirkland" products are excellent

Kirkland is their own label, but the best manufacturers produce the goods i.e.; Kirkland pet food is made by Iams, but with the Kirkland label a $25 bag of cat food costs Costco customers $8. Sweet deal! I've even purchased Kirkland running shoes, and they're great!

[Catshrink]

17. Iams makes Kirkland cat food???!!!!

Oh man, you just saved me a bundle. Thanks for the info on this.

[Desperadoe]

8. The Only place I shop

Not only because their prices are great but they do, indeed, treat their customers and their employees like humans. I have good friends who work there and they swear by that company.

I don't really think that I save a whole lot of money, because I buy so little but I have been a member for 5 years and I never think twice about renewing.

And yes, that is a refreshing concept coming from a CEO today and just reinforces the fact that the Wall Street corruption will be the downfall of this country. Just think of it, a company that actually is trying to build a long term operation is harshly criticized for not cutting the throats of it's employees and customers. Costco should use that as a commercial. People would love it today.

[wabeewoman]

9. Its a great store!

And I even have some stock. Course, I bought it higher than it is now. The only complaint I have is you have to buy such large amounts. Even whole chicken come in 2 packs! But the quality is excellent and the price is right.

[54anickel]

11. Local station here recently interviewed Oprah and asked so what's

it like when you walk into a WalMart? Oprah snaps, "Oh no, don't do WalMart, no WalMart" (interviewer had puzzled look). Oprah just continues on, "Costco - I go to Costco alot, I love that place."
Goes to a station break, "This segment has been brought to you by WalMart" with that big yellow smiley face....had to laugh at the irony.

[Desperadoe]

12. After I posted earlier

I went to Costco and purchased a 17" Envision CRT for $99.00 for my granddaughter. This was the third one of these 17" Envisons that I have bought in the last two months. A great price and a damn good little monitor. I can't beat that price anywhere, even online without paying tax.

I mentioned that article to the clerk that checked me out and he told me that the employees were really glad that Fortune ran that. They are quite pleased with the working conditions and the pay and benefits there and are proud that the company is getting the recognition.

Oh yeah, I also had a free lunch of samples..........hard to beat a deal like that. You don't get lunch at Walmart. It's been 5 years since I have set foot in Walmart and I will never buy one thing there again. It's a damn shame that American businesses have adopted this phony business philosophy of the quick buck over long term gains.

Something else that I noticed, the clerk who checked me out has been there at least 4 years and so have many others. The turnover is very low and morale is high. I guess that doesn't mean anything to todays corporate whores.

Ed

[briggen]

13. Wal-mart : the All American Co.

Sam wrapped the American flag around Wal-mart and sold Americans a bill of goods that's destroying this country.

There is a solution to the erosion of American jobs and only congress can apply the solution. But, they won't without enormous grassroots pressure. Click on/or copy and paste the link below::

http://www.geocities.com/wittcourt/

Jim Grimes

[annonymous]

14. My family does a lot of shopping at Costco.

They offer quality merchandise at low prices. I am glad to hear they treat their employees well.

[T Bone]

15. oh yeah COSTCO is great. Its the only place you can walk in and buy

a CD burner, some peanut brittle, Hillary's book for $14.95, and a KAYAK.

-apologies to whatever comedian on Comedy Central I got that from.
he used another combination before the kayak.

But I have bought all those things at a great price at Costco and I don't hear their employees complaining to me about their jobs like I do at Wal-mart which I avoid like the plague. Walmart is going to end up unionized because every company that has a union did something to deserve it, in my opinion.

I heard once too that these Costco owners contribute to progressive things -- bigtime too.

I like the shop and snack idea too. The orderve type things they pass out back in the food area are worth the membership price alone if you go every Saturday. HEY, it's Saturday and almost lunchtime ! Time to head up to Costco. New one just 2 miles from me. I almost always buy a box of one of the things I sampled too, and I think most people do.

[KCDem]

16. Costco is a very honest company

I got a phone call one afternoon from Costco customer service. The lady asked me if I could go get my receipt from the day before, and, once I found it, what the hand-written initials on it were. I said there weren't any. She said "well, then, you requested $20 cash off your debit card and we didn't give it to you. Come back to the store and there will be an envelope with your cash in it." Evidently, when someone requests cash, they have to initial the receipt when they hand you the cash, which both the cashier and I spaced out about, and the drawer had extra $. I was impressed with their honesty.

Also, their return policy is excellent--you can return ANYTHING for ANY reason for a full year, provided you're still a member.