Recently, a number of grassroots supporters have emailed in an article from this week's TheStreet.com, a business-focused web site, about U.S. retailers. In the article, it discusses the rise of Costco's stock:
Wal-Mart (WMT:NYSE) may be the world's largest retailer, but in terms of the stock market, Costco (COST:Nasdaq) has emerged as lord of the discounters.Shares of Costco have climbed 16.2% since the beginning of 2005. During that span, rival warehouse retailer B.J.'s Wholesale Club (BJ:NYSE) added 7%, while Target (TGT:NYSE) rose 6% and Wal-Mart dropped 12%.
Economic analysts offered interesting reasons for Costco's rise:
"Costco's stock is starting to get pricey, but I think it definitely deserves a premium over Wal-Mart since it's one of the few retailers out there that competes head-on with them and, quite frankly, beats the pants off them," says Morningstar analyst Anthony Chukumba. "They're incredible merchants. Their customer service is pretty much the best out there in all of retail. They treat their employees better. They pay them more. Their benefits are better, and the company still has room to grow both at home and abroad."
More specifics:
Chukumba says the average hourly wage at Costco is $17, compared with $10 at Wal-Mart. Also, Costco workers pay only 10% of their health premiums, on average, compared with the 33% paid by Wal-Mart's workers and the retail average of 23%. While this generosity has sparked criticism from Wall Street, Costco claims its compensation policies reduce employee turnover to less than 17%, excluding seasonal factors.
More from the article:
Higher compensation also lowers training costs, and it helps the company avoid the storm of public criticism that has been directed at Wal-Mart from unions, politicians and community activists."For our business, it has been important that we hired good people," says James Sinegal, Costco's co-founder, chief executive and president. "We've been a growth company since our inception. We want to continue to grow, and we promote almost entirely from within our company. Our view has been that if you hire good people and provide good jobs and good careers at good wages, then good things will happen to your business."
Posted by Jeremy - March 16, 2006 11:04 AM - In The News