New leadership era begins at Costco

ISSAQUAH, Wash. — First it was Steve Jobs, and now Costco’s legendary co-founder Jim Sinegal is stepping down as CEO.

He plans to retire effective Jan. 1, at which time current president and COO Craig Jelinek will assume the top job. The company telegraphed the move back in February 2010 when Jelinek, 58, was given his current responsibilities so analysts took the news in stride when it was officially announced Thursday morning in conjunction with the release of sales results for the month, quarter and fiscal year ended Aug. 28. Sinegal, 75, and Jelinek have worked closely together during the past 18 months, according to the company, and Costco co-founder Jeffrey Brotman, 68, will continue to serve as chairman.

The transition isn’t expected to result in any type of new strategic direction due to the fact that it is being made from a position of strength with Costco reporting some of its best financial results in years. In addition, Jelinek is a 28-year Costco veteran steeped in the company’s ways who began his Costco career as a warehouse manager in 1984, the year after Sinegal and Brotman founded the company. He has since served in every major role related to Costco’s business operations, most notably as EVP merchandising from 2004 until 2010 when he was given his current responsibilities and named to the Costco board. To further ensure a smooth transition, Sinegal will remain with Costco in an advisory capacity through January 2013 and in all likelihood will continue to serve on the company’s board as he will stand for re-election at the January 2012 shareholders’ meeting.

“I have total confidence in Craig's ability to handle his new responsibilities and feel we are fortunate as a company to have an executive of his caliber to succeed me as chief executive of Costco,” Sinegal said in a prepared statement.

News of the leadership transition overshadowed Costco’s otherwise solid sales results for August and its fiscal year ended Aug. 28. The company said sales for the month increased 17% to $6.9 billion for the four-week period ended Aug. 28. Results were aided by inclusion of sales from a Mexican joint venture without which the sales gain would have been 14%. For the year, sales increased 14% to $87 billion or by a less 11% if Mexican joint venture results are excluded.

Same-store sales for August, excluding gas, were 6% in the U.S. For the quarter and the full year comps increased 6% and 5%, respectively. Internationally, same-store sales on a constant currency basis and excluding gas increased 11% in August and 10% for the company’s fourth quarter and fiscal year. The company plans to report fourth quarter and fiscal year results on Oct. 5.

Costco ended its year with a total of 592 clubs, including 429 in the U.S., 82 in Canada, 32 in Mexico, 22 in the United Kingdom, nine in Japan, seven in Korea, eight in Taiwan and three in Australia.