2011 Power 50: No. 10 Jim Sinegal

For years, Jim Sinegal has been seen as the face of Costco no matter what position he has held.

One of the founders of the consistently successful membership club store chain, Chief Executive Officer Jim Sinegal gets much credit from financial analysts and other sources for guiding the company through the recession with little trouble, and for keeping the company on an even keel while growing traffic and sales.

Strengthening the company's Kirkland private-label brand helped see the company through the recession, Sinegal told SN during an earlier interview. And, financial analysts are currently very positive about the company's outlook.

“With traffic running at 4%-plus and inflation building, we like the prospects for sales momentum,” Mark Wiltamuth and other Morgan Stanley analysts wrote in a May 2011 report.

In an earlier meeting with Costco officials at the company's Issaquah, Wash., headquarters, analysts were told that new store openings would be ramped up in 2011 to the more normal 25, giving the analysts confidence to raise the target price for the company's stock.

Supermarket News has included Costco in its list of 25 top retailers worldwide for the last few years. The latest SN list, based on calendar 2010 or the fiscal year closest to it, ranked Costco seventh in sales volume. The rankings are gleaned from company reports and estimates from industry sources.

In Sinegal's words, “We run a tight operation with extremely low overhead, and that enables us to pass on dramatic savings to our members.” That sounds simple enough, offering customers value, but it's the business model that makes Costco unique and particularly successful. “It's a business model that can work just about anywhere,” one financial analyst said.

And Matthew Pixa, registered investment advisor and president of My Portfolio Guide, has pointed out that Costco's management is a big part of making it work.

“In the specific case of [Costco] I will say I believe management is an added bonus for owning the stock,” Pixa wrote. “One major point in its corner is the general candor and respect their management team garners. From the top down, they appear to have a very hands-on approach to communicating potential issues as well as day-to-day operations with in-store visits and the like.”

Even as the company takes care of its customers and looks to grow sales, it also sees that shareholders get a fair shake. Sinegal, however, insists on taking the long view. Indeed, talking to Wall Street analysts about the way he runs Costco, he said: “Wall Street is in the business of making money between now and next Tuesday. We're in the business of building an organization, an institution, that we hope will be here 50 years from now.”