Costco CEO since 2012 steps aside

[SamSpade]

Pretty long run for a CEO of a retail company these days.
COO and president of the board is succeeding so not too much excitement around there.
CNN Money: Costco CEO steps down

[arizonaguy]

Pretty long run for a CEO of a retail company these days.
COO and president of the board is succeeding so not too much excitement around there.
CNN Money: Costco CEO steps down

I've noticed a gradual, but steady, downhill slide in Costco's operation since he became CEO. I doubt much will change but maybe change is necessary at this time.

The new CEO has been with the company for 40 years and started as a forklift driver, so there is that.

[ClownLoach]

Pretty long run for a CEO of a retail company these days.
COO and president of the board is succeeding so not too much excitement around there.
CNN Money: Costco CEO steps down

I've noticed a gradual, but steady, downhill slide in Costco's operation since he became CEO. I doubt much will change but maybe change is necessary at this time.

The new CEO has been with the company for 40 years and started as a forklift driver, so there is that.

I met Jelinek at a grand opening last year, and he seemed quite tired. He had a reputation for being a fireball and a tough executive but I didn't get that impression. He had a few other people I would assume were C-suite members that he broke away and walked/talked one on one a few times. It made me feel like I was watching a succession plan unfold even then, like he was showing them what to do if they get his job. He did seem very interested and stopped to talk with any customer who had a military hat, which is common for retirees, and thanked them for their service then talked with them for a few minutes.

I think it's a good time for a transition. Sam's Club is a viable and nimble competitor for the first time in decades (if ever), but Walmart is so broken now and devoid of talent that they recently stripped away the Sam's C-suite including the CEO and moved them back to the Walmart side. So if Sam's stumbles in this CEO transition then they can pounce on any opportunities that arise from it... Obviously they are not "upgrading" the talent at Sam's but robbing it instead. And Costco needs some new blood that isn't afraid to make some new decisions. I don't think Jelinek was going to make any serious changes so close to the end of his career. I see cracks in their merchandising strategy emerging that seem simple but show lost sales and profit.

Example is seemingly trivial: I garden a lot, and Costco has a exceptional deal available on flower bulbs you plant in fall like daffodils and tulips from a vendor of top quality not sold in any other garden center or store. Last year they seemed to be missing entirely from California. I picked some up on a trip to Washington where they were selling entire pallets of them. Didn't see them this year either so I inquired with their customer service folks and they found that they only sent them to 10 California stores so they could treat them like a treasure hunt item when they should be a gardening staple at all locations... Worse if you reviewed the list it made no sense at all as many were renter-majority areas when you'd be better off putting them in homeowner areas. One store selling was reasonably close in Rancho Cucamonga and the other was Garden Grove. These bulbs were flying out the door, and when my wife checked Garden Grove a few days later the entire pallet rack was wiped out. Apparently they shipped so many to the Portland area that they've got pallet after pallet making walls that aren't moving up front, meanwhile California got minuscule amounts and sold out in days. Costco used to be able to figure these things out but now they seem to make similar errors where you see a product only gets to one store in a market and is displayed en masse but doesn't sell fast enough to earn the space when it could have gone to multiple stores and sold in a few days. This was the original treasure hunt concept, but that's dying down as the stores become overwhelmingly similar with only one or two "hunt" items at a time that sit in a massive heap for weeks or a month versus the past constantly changing items on the front wall when you enter. In fact I found out the front wall is now standardized and planogrammed for a month. something Costco never did before.

Hopefully they fix the dumb capital expenditure projects like closing off the skylights and installing mysteriously dimmer light fixtures too that make the stores into dark caves, weird things happening right now which makes me wonder if Jelinek had just taken his foot off the gas and people were starting to get out of hand. Some bad decisions upcoming on locations too like Escondido mall former Sears, wrong demographics and bad location with poor access. New stores built too small, example is new Murrieta store which is busier than the once overloaded Temecula location but was built to the new smaller prototype and they can't handle the crowds. Just looking at a simple map that problem could have been easily predicted and they had room for a larger box but now will have to spend money expanding it piecemeal.

Anyway, there are opportunities to fix the problems at Costco and I think they have a great foundation to build off of for a new leader who is ready to make some good changes. Looking forward to seeing what happens.

[ClownLoach]

Interesting news, apparently Costco is currently running aggressive membership discounts. They are effectively running a $20 deal, sign up for a Gold Star membership for $60 and get an instant $40 Costco Gift Card.

Costco is apparently concerned about their membership ranks as this is a very aggressive promotion.

I continue to see less crowds and smaller baskets at Costco and longer return lines, while Sam's has full cart loads going out. They both have unique draws which I don't feel like debating here as we've all done it before. I tend to visit Costco more often, but buy more at Sam's when I go there. They are both splitting my wallet when five years ago I had given up on even trying to get a discounted Sam's card because I just didn't buy anything there.

Costco has also announced that customers with the Costco Visa card can now divide up large purchases into installments and make payments interest free. This is similar to the buy now pay later type promotions popping up everywhere but it's using their card which is a more trustworthy payment instrument in my mind.

Costco seems to really be feeling the squeeze the last couple of months.

[HCal]

I think Costco is a prime example of a company that is resting on its laurels. They have historically done incredibly well, which has made them become complacent and not keep up with changes in the market. They didn't invest in e-commerce, let alone scan-and-go. They didn't keep up with changes in demographics, like younger people preferring to live in urban areas and having fewer kids.

If this new CEO doesn't make some changes fairly quickly, they will start to struggle. I don't think they are going to crash anytime soon, but sales increases will not keep up with expectations.

Perhaps international expansion is their saving grace. Their new warehouses in foreign countries have been doing rather well.

[storewanderer]

I think Costco really left a bad taste in people's mouth with the card sharing harassment and how they went about it.

People are struggling with the inflation that has occurred on various products and services and health insurance and auto insurance providers have pushed 15-25% increases out in recent months or will be rolling such increases out 1/1/2024 so it is going to get even worse soon here.

A lot of businesses have been trying to operate on installment/membership models and I think there is a segment of consumers who are struggling who have gotten the bright idea to "cut installment/memberships they don't really need" so things like the monthly car wash membership, that fitness membership you rarely or ever use, get cut. Then the next month comes and as everything keeps increasing in cost you keep thinking of what else to cut. That Costco membership just so happens to be coming due again and you start to think gosh every time I go shop there I spend $200 or $300 and now they want $60 for a membership renewal you know what I am going to just not renew that membership.

Costco can be a major cash cow in the US on an ongoing basis but I think the major growth era may be over for them in the US.

They probably need to adjust some of their perishable merchandise to some smaller sizes (Sam's has done a lot of this) because consumers are also becoming much more concerned about waste and what I have learned with dedicated Costco grocery shoppers is they throw away a LOT of food. They think they are getting some screaming deal at Costco but they throw so much away they'd be better off ad shopping at other grocers and just buying what they need.

[mbz321]

Costco has also announced that customers with the Costco Visa card can now divide up large purchases into installments and make payments interest free.

I haven't heard of Costco themselves mentioning or promoting this in any way. It is already a feature on most (all?) Citi credit cards, and there is typically a small service fee involved (still a lot better than the typical credit card interest rate though!), although you are correct in there is a promotion currently that there is no fee on a $75+ purchase if the payment is split over 3 months. Link to Citi Card Page

[mbz321]

I think Costco is a prime example of a company that is resting on its laurels. They have historically done incredibly well, which has made them become complacent and not keep up with changes in the market. They didn't invest in e-commerce, let alone scan-and-go. They didn't keep up with changes in demographics, like younger people preferring to live in urban areas and having fewer kids.

If this new CEO doesn't make some changes fairly quickly, they will start to struggle. I don't think they are going to crash anytime soon, but sales increases will not keep up with expectations.

As a current employee, I wholeheartedly agree and makes me a bit concerned about the future. Lately on most days, our daily sales are under plan (not by a lot, but those seem to be the only numbers Costco cares about for staffing and everything else) We are still busy as can be, but many are being a bit more choosy in their purchases (the amount of 'go backs' we have by the end of the day is unreal).

Hours have been cut across the board almost daily, which leads to a skeleton crew level of staffing (combined with call-outs, which lately seems to be many people a day) and really not a good experience for anyone and is flat-out embarrassing. We did hire Seasonal workers, but most are getting maybe 15 hours a week and many have simply quit or stopped showing up at all (I can't blame them). Management is stressed out beyond belief. I'm hoping for a miracle with the new CEO, but keeping my expectations low.

[veteran+]

I think Costco really left a bad taste in people's mouth with the card sharing harassment and how they went about it.

People are struggling with the inflation that has occurred on various products and services and health insurance and auto insurance providers have pushed 15-25% increases out in recent months or will be rolling such increases out 1/1/2024 so it is going to get even worse soon here.

A lot of businesses have been trying to operate on installment/membership models and I think there is a segment of consumers who are struggling who have gotten the bright idea to "cut installment/memberships they don't really need" so things like the monthly car wash membership, that fitness membership you rarely or ever use, get cut. Then the next month comes and as everything keeps increasing in cost you keep thinking of what else to cut. That Costco membership just so happens to be coming due again and you start to think gosh every time I go shop there I spend $200 or $300 and now they want $60 for a membership renewal you know what I am going to just not renew that membership.

Costco can be a major cash cow in the US on an ongoing basis but I think the major growth era may be over for them in the US.

They probably need to adjust some of their perishable merchandise to some smaller sizes (Sam's has done a lot of this) because consumers are also becoming much more concerned about waste and what I have learned with dedicated Costco grocery shoppers is they throw away a LOT of food. They think they are getting some screaming deal at Costco but they throw so much away they'd be better off ad shopping at other grocers and just buying what they need.

You might have read the same article that I read about this Membership Fee thing.

It discussed how many Americans are over burdened with all these Fees they are paying to glean discounts and perks via membership. It also discussed food waste in relation to large sized product purchases.

[storewanderer]

You might have read the same article that I read about this Membership Fee thing.

It discussed how many Americans are over burdened with all these Fees they are paying to glean discounts and perks via membership. It also discussed food waste in relation to large sized product purchases.

Didn't see that article but have seen a lot of news stories that are touching on these topics. Also touching on how hard it is to terminate some of these subscription services...

Food waste is a huge issue at every level.

Costco is going to need to make some changes.

With that said the majority of people I know did Thanksgiving shopping at either Costco or Sam's Club. What I don't know is did they just buy food or did they impulse buy other items in the process of buying the food? I was surprised by this as I wouldn't have even considered doing that at either of those stores (WAY better deals shopping the ads of the other grocers, plus the product size issues).

I feel like Costco's merchandising/buying has gone downhill in the past year or two. They don't seem to be catching the level of impulse buying they were in the past. I don't know if they don't have the right products or the customers are simply becoming more disciplined.