I read an interview with the CEO of Costco, Jim Sinegal, and found myself impressed with what seems like Mr Sinegal's truly long-term outlook and his commitment to investing in his company with this mindset.
Summarized excerpts of the Wall Street Journal interview are below and are indicative of Mr. Sinegal's refreshingly long-term outlook. When asked about balancing the needs of customers, employees and shareholders in the face of some sentiment that shareholders eel they come third in that equation, he responded, "That's not the case. We want to obey the law, take care of our customers, take care of our people and respect our suppliers. And we think that if we do those things pretty much in that order, we're going to reward shareholders." Well said! Any underlying business is about serving a customer need and if that is done in an economically sound manner (meaning you don't give away the product), the value to shareholders should result from these efforts. The tail should not wag the dog.
When questioned about whether giving customers great deals hurts profits, Mr Sinegal responded, "There are all sorts of opportunities where you can try to sneak in a little more margin here and little more profitability there, but that's not what we're about. When you start suggesting that it's not important to save the customer money on this because they'll never know the difference, you start to fool yourself. The customer trusts us. You don't want to give up on that type of reputation." Bravo.
What do we have here? A truly customer-oriented and employee-oriented executive. While customer-centrism and employee-centrism (yes I make up words) are often talked about, this type of true focus on these parameters is refreshing and rare.
The ultimate question you may be wondering, however, is do all these nice ideas around business by Mr. Sinegal actually work? Per SmartMoney, Costco trades at a forward P/E ratio of nearly 24 which is at a premium to its peers. Additionally, over a 5 year period, it was up 80+% while competitor BJs was up 40+% and Walmart (owner of Sam's Clubs) was actually down over that period. So it looks like shareholder value is being created by Mr. Sinegal and his team at Costco through their focus on the constituents that enable business success - customers, employees and suppliers/partners.
crap, working for costco sucks! bla bla bla jim sinegal bla bla lies lies
Posted by: costco employee | August 05, 2008 at 05:31 PM