Why Wall Street Thinks Costco Is A Chump

[zenwalk]

I knew there was something I really liked about Costco. For starters, it's not WalMart. It's an old article but probably new to many.

But not everyone is happy with Costco's business strategy. Some Wall Street analysts assert that Mr. 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. He rejects Wall Street's assumption that to succeed in discount retailing, companies must pay poorly and skimp on benefits, or must ratchet up prices to meet Wall Street's profit demands.

Good wages and benefits are why Costco has extremely low rates of turnover and theft by employees, he said.

The point is, decency is possible.

http://www.nytimes.com/2005/07/17/bu...pagewanted=all

[veritas]

Another point is that if you don't like Costco's business model, don't buy its stock. It's a free market and there are plenty of other companies out there.

[The Eternal White Belt]

Interesting article. I'm not sure I would put my salary at $350k if I was in his position, but something tells me that's not the whole story...

[zenwalk]

I like the part of the story that we do know. I'm sure he has his cache of stock. If he's paying 17/hr and bennies he should be saluted. He's showing it can be done if the guy at the top doesn't insist on being a billionaire.

[workerbee]

Your admiration may be short lived. lol

Costco will spend $3 billion to pay a special dividend of $7 per share next month ahead of higher tax rates that may kick in come January.

Many companies are making special end-of-year dividend payments or moving up their quarterly payouts because investors will have to pay higher taxes on dividend income starting in 2013, unless Congress and President Barack Obama reach a compromise on taxes and government spending.

The Issaquah, Wash., company said Wednesday that the special dividend will be payable Dec. 18 to shareholders of record Dec. 10. In addition, Costco Wholesale Corp. will pay its regular quarterly dividend of 27.5 cents per share on Nov. 30 to shareholders of record as of Nov. 16.

[ivanbalt]

I remember after my first visit to Costco, I was amazed at how nice the employees were. I had to ask someone I know if they were always like that. And they are.

Imagine that, treat the employees well and they treat the customer well. Of course, my shopping agenda isn't dictated by low, low prices.

[zenwalk]

Your admiration may be short lived. lol

Are you trying to make a point because you've lost me already.

[ivanbalt]

Your admiration may be short lived. lol

Costco will spend $3 billion to pay a special dividend of $7 per share next month ahead of higher tax rates that may kick in come January.

Many companies are making special end-of-year dividend payments or moving up their quarterly payouts because investors will have to pay higher taxes on dividend income starting in 2013, unless Congress and President Barack Obama reach a compromise on taxes and government spending.

The Issaquah, Wash., company said Wednesday that the special dividend will be payable Dec. 18 to shareholders of record Dec. 10. In addition, Costco Wholesale Corp. will pay its regular quarterly dividend of 27.5 cents per share on Nov. 30 to shareholders of record as of Nov. 16.

So they won't be treating their employees well anymore?

[dsummoner]

As long as Costco is not engaged in collusive economic fascism with the central regime, their business model is their's to choose. It certainly does not support an argument of general applicability.

[BiggSeth]

amazing how a successful business model outside the norm of "glorified slavery" as some would say is chastized by those driven by greed.

I shop Costco for our bulk needs, I have always found the employees to be helpful, friendly and well....there.

we still see the same "reciept checkers" that have been at our Costco since out daughter (now 7) was being carried around in her car seat bucket. They have watched her grow up, and often comment on "how she has grown into a nice young lady"

We don't tip them to be nice, they just are.

screw wall street.

[skeemer]

Your admiration may be short lived. lol

Costco will spend $3 billion to pay a special dividend of $7 per share next month ahead of higher tax rates that may kick in come January.

Many companies are making special end-of-year dividend payments or moving up their quarterly payouts because investors will have to pay higher taxes on dividend income starting in 2013, unless Congress and President Barack Obama reach a compromise on taxes and government spending.

The Issaquah, Wash., company said Wednesday that the special dividend will be payable Dec. 18 to shareholders of record Dec. 10. In addition, Costco Wholesale Corp. will pay its regular quarterly dividend of 27.5 cents per share on Nov. 30 to shareholders of record as of Nov. 16.

In other words, they are rewarding their shareholders for their investments, in addition to treating their employees well? Sounds like a win-win all around!

[workerbee]

Are you trying to make a point because you've lost me already.

The point, one of several, is costco's stock rose 6 % on the announcement of its intended tax dodging.

[skeemer]

The point, one of several, is costco's stock rose 6 % on the announcement of its intended tax dodging.

Tax dodging? I think you meant to say good financial planning.

[songfourone]

Mr Singal gets it.

Find a pleasant Walmart employee, and try and find a Costco unhappy employee.

[workerbee]

You must be a righty!

[Jeebus]

The point, one of several, is costco's stock rose 6 % on the announcement of its intended tax dodging.

More like a tax revolt, as many many companies are doing the same - paying their dividends before the end of the year to avoid the punitively high tax penalties being put in place by Obama.

For the stockholders, getting that $7 per share cash dividend this year -- at a 15% tax rate vs next year's 43.4% tax rate -- is manna from heaven.

Costco is actually borrowing the money to pay the dividends this year, as borrowing is cheap right now.

Sure hope the Obama administration isn't counting on all those "future taxes" they were hoping to reap that will not be coming their way.

[BiggSeth]

The point, one of several, is costco's stock rose 6 % on the announcement of its intended tax dodging.

tax dodging?

you mean not surrendering more profit to the marxists ruining this country?

BRAVO COSTCO!

[zenwalk]

The point, one of several, is costco's stock rose 6 % on the announcement of its intended tax dodging.

Who's talking about taxes? I'm pointing out that in this day and age it is possible to pay a living wage, bennies AND pay a dividend. Costco is to be commended.

[dialtone]

tax dodging?

you mean not surrendering more profit to the marxists ruining this country?

BRAVO COSTCO!

You mean the President that he endorsed.?