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Last week’s announcement that Craig Jelinek, the second CEO in Costco’s 40-year history, plans to retire in early 2024 led to articles highlighting his commitment to low prices (and margins) and treating employees well.
Costco’s commitment to low prices is best exemplified by the warehouse club’s $1.50 hot-dog-and-fountain-drink combo, the same price since its introduction in 1985. Also called out was Costco’s popular $4.99 rotisserie chicken, supported by the 2019 opening of a $450 million poultry complex in Nebraska.
Costco’s corporate staff also has a reputation for frugalness across operations, including paying executives well below their peers. Coupled with buying bulk in fewer quantities and the benefit of membership fees, an emphasis on passing down expense savings has helped keep prices low.
Jelinek told Yahoo Finance last December that he believes Costco is the low-price leader across most essential categories. He said, “Our markup's about 13%. So any rebate money we get, we pass right on to the consumer. We're a top-line company. We drive sales. We're not a margin company.”
One area where Costco doesn’t skimp is employees, where the warehouse club has built a reputation for above-average pay and benefits.
"I just think people need to make a living wage with health benefits," Jelinek told Bloomberg in 2013. "It also puts more money back into the economy and creates a healthier country. It's really that simple."
Jelinek has been a contrarian among retail execs as a strong advocate for raising the federal minimum wage.
Since taking over in January 2012, Costco has grown from 592 clubs to 861, including entering China, Spain, France, Iceland, New Zealand, and Sweden.
Earning less attention as part of Jelinek’s 11-year CEO tenure has been Costco’s continued commitment to quality, its opportunistic buying approach that supports the club’s treasure hunt experience, and the further development of the Kirkland Signature brand.
His successor, Ron Vachris, a 40-plus-year Costco vet and current COO, will continue to face questions over margins, Costco’s slow approach to e-commerce, and a likely membership fee hike in 2024.
William Blair & Co. analyst Phillip Blee wrote in a note, according to Winsight Grocery, that the promotion was expected and Vachris is well-prepped for the job. He said, “We believe the long tenure of Vachris and the broader executive management team, coupled with the company’s lean, consistent operating model, should ease investor concerns about a potentially bumpy transition on the retirement of Jelinek.”