How Costco Became the Anti-Wal-Mart

The New York Times ^ | July 17, 2005 | STEVEN GREENHOUSE

[TaxRelief]

... Some Wall Street analysts assert that CEO Jim Sinegal is overly generous not only to Costco's customers but to its workers as well.

Costco's average pay, for example, is $17 an hour, 42 percent higher than its fiercest rival, Sam's Club. And Costco's health plan makes those at many other retailers look Scroogish. One analyst, Bill Dreher of Deutsche Bank, complained last year that at Costco "it's better to be an employee or a customer than a shareholder."

Mr. Sinegal begs to differ. ...Good wages and benefits are why Costco has extremely low rates of turnover and theft by employees, he said. And Costco's customers, who are more affluent than other warehouse store shoppers, stay loyal because they like that low prices do not come at the workers' expense. "This is not altruistic," he said. "This is good business."

...Costco's stock price has risen more than 10 percent in the last 12 months, while Wal-Mart's has slipped 5 percent. Costco shares sell for almost 23 times expected earnings; at Wal-Mart the multiple is about 19. Mr. Dreher said Costco's share price was so high because so many people love the company. "It's a cult stock," he said.

[Venerable Bede]

Wal-Mart buys their meat in bulk from Tyson. I have a friend who works there as an electrician and he brought it up. I've never shopped at Wal-Mart's meat department, though. There's a really cool super-mercado here that sells the same stuff for half the price, and it's the only place in town where I can find football-sized malangas and fresh lemongrass.

Offtopic, I know, but take a malanga to your local deli and have them slice it into thin chips and fry it up. Lays can't even touch that, although Terra chips are pretty damn good.

[RFT1]

WMT P/E is 20, Costco P/E is 22, not a whole lot of difference, and if one clocks this link, despite the fact WMT has been very firm on wages and benifits to the point they have taken very massive PR hits, their share price has gone down 20%, while Costco has gone up 25%.


http://www.google.com/search?oi=stock&q=stocks:WMT&prev=/search%3Fq%3Dwmt%26hl%3Den%26lr%3D

[MEGoody]

So who carries the Heinz catsup? That might be the decision maker for me. LOL

[lewislynn]

Clear the air of smoke then read this while you're lighting one from the other.

[Still Thinking]

I think the Times might be comparing apples to oranges here. When I think of Costco I think of bulk items--the infamous 20 gallon jug-o-mayonnaise and what have you. Wal*Mart just sells cheap crap.

In the article, wages were compared to Sam's Club, which is Wal Mart's club store that sells a similar line to Costco, so the comparison is OK.

[JZelle]

Isn't Safeway still union?

[wrathof59]

I haven't done any DD on their SEC filings (especially their credit facilities), but stocks like this being pushed in fluff pieces from the NY Slimes puts red flags in my gut.

$45.00 a share for this with a .92 (1% dividend)and a 19;1 going forward p/e tells me it's too pricey, I usually only buy in 1,000 share blocks, and if this Costco doesn't beat the street for a couple of quarters, I could lose a bushelful of money.

There's a Big downside when I buy an over-priced stock like this.

[wrathof59]

WM's stock price has been in a muddle for a few years now, that's common knowledge.

[x]

What is BJ's?

Ask Bill Clinton.

No, actually, it's BJ's Wholesale, another competitor.

There are other alternatives if you don't like Walmart and don't want to support Costco, but they may not be in your area.

[Still Thinking]

What I also like about Walmart is they have the audacity to sell Christian books - Bibles etc.! Can you iamgine that! When was the last time you saw that in Costco?

I know Costco has religious books. I think they have Bibles, too, but I'll try to remember to check the next time I'm in there.

[old and tired]

What is BJ's?

It's a wholesale club like Sam's or Costco. They have them here in the Philly area - I'm not sure where else. www.bjs.com

[old and tired]

Wonder if the new Sam's Club in Horsham will make a dent there. I heard it's a beautiful big store.

Don't know. I'm not sure we can justify 3 memberships, but with Christmas coming...

[Still Thinking]

Aside from the Rep/Dem aspect, your outlook and mine on how to run a business are identical. The workers and customers make the company. If you take care of the customers and employees, the business almost cannot fail. If the business does well, the shareholders will do well. It's a Bible principle "do unto others as you would have them do unto you". It works. Putting the interests of the other parties to the transaction ahead of their own (while not allowing themselves to be cheated) their own interests are taken care of. For the non-religious: "What goes around comes around".

[NYorkerInHouston]

I checked out that website and though it is quite interesting the criteria used to judge whether a company is blue or red is in some (not all) cases rather flimsy.

Examples (Red):

Ace Hardware: Top of the list for reddest companies on the basis of a 300 dollar contribution- thats right 300 dollars.

Kohl Corporation: Red based on a $2000 contribution by the current chairman and CEO (I thought that Senator Herb Kohl's family still had some ownership in it- anyone know?)


Examples (blue):

Benihana: $3000 by the CFO. The President/CEO made no contributions

Black and Decker: $1000 by the CEO

Now the website does identify some companies with significant leanings but including stuff like this is idiotic.

[Irish Queen]

My gosh, where did your information that illegal workers are imprisoned in Wal-Mart stores? The starting wage for entry level employees is around $7.40. But there are quarterly pay raises for everyone, storewide and department bonuses, and extra pay raises for outstanding individual workers.

Last night on "Without A Trace" the missing person worked at fictional Mega-store called EveryMart. The wages were so low that the lowly employees had to clean houses, be drug runners or sleep with the boss to support themselves and their families. And the only place they could live was in run-down, drug infested rent by the week motels. The heroine of the story became a drug runner to avoid the hearing aid her little boy needed. In real life, that young mother would probably have been provided the need hearing aid through one of WalMarts special programs.

I live in Nevada, near Carson City. There is very little unemployment in the area, what with all the businesses fleeing California's high taxes and mindless regulations. Plus there are lots of employment opportunities in in Casinos and hotels. A new Walmart is being opened on the north end of Carson City. And some of my neighbors are eager to quit their present jobs (hotel desk clerk, teacher aide) to work at Walmart. If the conditions at WalMart were poor, the employees at WalMarts around here would vote with their feet and could easily find work somewhere else.

[texan75010]

"I shop at Wal-Mart and Costco - they're right next to each other near my house. Both are always crowded, but Costco seems to do a better job of getting you through the checkout quickly. I wish Costco would stay open longer."

Ditto to that. My wife will keep both of them in business. Plus, contributing large sums of cash to the Dims has not won them any elections recently....

[JZelle]

Yeah, those Bruckheimer shows lover making their political statements. I can barely handle "Without a Trace".

[Gabz]

You are a nasty piece of work, aren't you?

[RFT1]

Wall Mart hasd a very high turnover rate of employees, the reason why people work at WMT is because often they can not get work elsewhere, and employee morale is genally rock bottom, hence, the reason why for the increaseingly bad customer service experience one has at these stores.

[Extremely Extreme Extremist]

I would shop there is Karl Marx himself was checking cards at the door.

Was Stalin your cashier? :-)