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Costco's Profit Soars To $459 Million As Low-Wage Competitors Struggle

Glad to hear Costco's doing so well. Not any surprise considering the madhouse I have to endure whenever I go there on the weekend. Sam's and Wal-mart (Hock-tooey!) are prime examples of what is wrong with American capitalism. Corporatism at its worse. Circumvent every labor law to be legally compliant but remain unethical as hell, strong arm communities by demanding tax free status to build their temple's of doom for a period of 20 years and then once the time is up they move out of the location build a new one right next to it and then demand a new tax free life for another 20 years or threaten to pull stakes. Pay such a meager wage that the employees can only afford to shop at their place of employment, I mean talk about wage slavery...

Does it seem more than suspicious to anyone else that the rise of Wal-Mart (Hock-tooey!) came about the same time another Little Rock darling made his way into the WH? There couldn't be any correlation, I mean could there? The government wouldn't conspire with big business, would it?
 
poweRob said:
So much for the notion our economy is being destroyed because lazy
Americans are overpaid. Not to mention, unlike WalMart, Costco employees don't qualify for food stamps and soak up $2.66 billion in taxpayer subsidies to run their business. Amazing ain't it?

Costco's Profit Soars To $459 Million As Low-Wage Competitors Struggle

A typical Costco worker made $45,000 in 2011, according to Fortune. That’s compared to Sam’s Club workers’ average salary of $17,486 per year, according to salary information site Glassdoor.com. Walmart has also been the target of protests by some of its workers, who are protesting what they say are the company’s low wages.

The big box giant's profit jumped 19 percent to $459 million last quarter, thanks in part to the company’s efforts to offer discounts to lure more members, according to Bloomberg. The company was able to offer those discounts and boost its profits while paying its workers a decent wage, a claim many of Costco’s competitors can’t make.

Nor can Costco's competitors claim growth quite like the wholesale retailer. Walmart’s sales suffered last quarter as shoppers struggled with a delay in their tax refund checks and a payroll tax hike. The company’s Sam’s Club unit, which is comparable to Costco, contended with similar obstacles in 2012.

Target, another Costco competitor, lowered its earnings forecast for the year, after customers cut back, pushing the retailer’s profits down 29 percent.​
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No one is forced to shop there.
 
poweRob said:
So much for the notion our economy is being destroyed because lazy Americans are overpaid. Not to mention, unlike WalMart, Costco employees don't qualify for food stamps and soak up $2.66 billion in taxpayer subsidies to run their business. Amazing ain't it?

Costco's Profit Soars To $459 Million As Low-Wage Competitors Struggle

A typical Costco worker made $45,000 in 2011, according to Fortune. That’s compared to Sam’s Club workers’ average salary of $17,486 per year, according to salary information site Glassdoor.com. Walmart has also been the target of protests by some of its workers, who are protesting what they say are the company’s low wages.

The big box giant's profit jumped 19 percent to $459 million last quarter, thanks in part to the company’s efforts to offer discounts to lure more members, according to Bloomberg. The company was able to offer those discounts and boost its profits while paying its workers a decent wage, a claim many of Costco’s competitors can’t make.

Nor can Costco's competitors claim growth quite like the wholesale retailer. Walmart’s sales suffered last quarter as shoppers struggled with a delay in their tax refund checks and a payroll tax hike. The company’s Sam’s Club unit, which is comparable to Costco, contended with similar obstacles in 2012.

Target, another Costco competitor, lowered its earnings forecast for the year, after customers cut back, pushing the retailer’s profits down 29 percent.​
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In Canada, Sams Club set up shop and was clobbered by Costco, formerly Price Club, and closed down all their locations within a few years and ran back to the US.

I've been a member at Costco for 22 plus years and I generally go once a month - it's terrific, the staff is terrific, the prices are great for what I want and the selection is excellent as well - in addition, their proprietary products are excellent quality and a great price in comparison to name brands.

I wouldn't begrudge Costco any profits they make - they're a true private entity success story and more power to them.
 
CanadaJohn said:
In Canada, Sams Club set up shop and was clobbered by Costco, formerly Price Club, and closed down all their locations within a few years and ran back to the US.

I've been a member at Costco for 22 plus years and I generally go once a month - it's terrific, the staff is terrific, the prices are great for what I want and the selection is excellent as well - in addition, their proprietary products are excellent quality and a great price in comparison to name brands.

I wouldn't begrudge Costco any profits they make - they're a true private entity success story and more power to them.
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When I was younger I worked for Sam's Club for six years and I just prayed a Costco would move to town so I could go work there. Don't know about now but it was not long after the Price/Costco merger and they just didn't have any inroads in the South where I was. They were a west coast company expanding East and Sams was a semi-Southern company spreading West and North.
 
poweRob said:
And on the flipside of that coin...

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That article is three-and-a-half years old. The job cuts included people who did in-store demonstrations, but then those jobs weren't really cut; they were outsourced--something a smart management would consider doing if it made business sense. Apparently, it did. The company must being doing something right, because last year Sam's earned $2 billion on $56 billion in sales.

http://az204679.vo.msecnd.net/media/documents/2013-annual-report_130108806067963477.pdf
 
MaggieD said:
Well, I don't believe it. I don't know how they arrived at "the typical Costco employee makes $45,000 a year," but I don't buy it. I don't care what the survey shows.
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Has anyone mentioned the "U" word yet? This might be one reason Costco has a higher "typical" wage than Wal-Mart:

The Teamsters Union represents more than 15,000 Costco workers at 55 locations in California, New York, New Jersey, Maryland and Virginia....

Costco Workers Stand Together | International Brotherhood of Teamsters (IBT)
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Ahlevah said:
Has anyone mentioned the "U" word yet? This might be one reason Costco has a higher "typical" wage than Wal-Mart:
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Gosh, a well run business can have a unionized workforce, and still make a good profit. Who would have thought it.
 
Ahlevah said:
Has anyone mentioned the "U" word yet? This might be one reason Costco has a higher "typical" wage than Wal-Mart:
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Good find, Ahlevah. I don't think anyone caught it but you. I'm amazed it wasn't mentioned in the OP article.

As to the $45K number bandied about, that number includes all employees of Costco, from the CEO on down. Check Glass Door for rank-and-file averages. The OP article is somewhat misleading. Just by way of interest, I checked the CEOs salary. It's $350K a year. Surprisingly low. With his other compensation, though, he earned over $2 million. That's better. ;)
 
specklebang said:
I was a high wage employer. The cost of training a new employee exceeds the value of keeping experienced employees not to mention that when you come to the office, your employees love you.
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Good point. It was argued a little more analytically in Harvard Business Review:

(L)et’s assume that the total cost of replacing an hourly employee at Costco or Sam’s Club is only 60% of his or her annual salary. If a Costco employee quits, the cost of replacing him or her is therefore $21,216. If a Sam’s Club employee leaves, the cost is $12,617. At first glance, it may seem that the low-wage approach at Sam’s Club would result in lower turnover costs. But if its turnover rate is the same as Wal-Mart’s, Sam’s Club loses more than twice as many people as Costco does: 44% versus 17%. By this calculation, the total annual cost to Costco of employee churn is $244 million, whereas the total annual cost to Sam’s Club is $612 million. That’s $5,274 per Sam’s Club employee, versus $3,628 per Costco employee.

The High Cost of Low Wages - Harvard Business Review
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MaggieD said:
Good find, Ahlevah. I don't think anyone caught it but you. I'm amazed it wasn't mentioned in the OP article.

As to the $45K number bandied about, that number includes all employees of Costco, from the CEO on down. Check Glass Door for rank-and-file averages. The OP article is somewhat misleading. Just by way of interest, I checked the CEOs salary. It's $350K a year. Surprisingly low. With his other compensation, though, he earned over $2 million. That's better. ;)
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The vast bulk of Costco is not unionized.
 
We have one Costco in Houston that I know of, everything else is WallMart.

I know Wall-Mart treats their employees well, considering many of the in store positions require no higher ducation or long term training.
 
poweRob said:
The vast bulk of Costco is not unionized.
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Fair enough. I find it interesting that the company bases its company-wide employee compensation packages on the collective bargaining agreements it negotiates on a three-year cycle. Presumably, this comes from Costco management's conclusion that this makes good business sense by reducing employee turnover and theft. (After all, if workers love you, or at least like you, they're less likely to leave or steal from you.) Paying a higher wage would also, I think, help keep meddling unions at bay. That probably figures into management's calculus somewhere.
 
Why are more and more Corporations forgetting this? They're getting rich now but they're stabbing the future in the back (pun inadvertent).



Ahlevah said:
Good point. It was argued a little more analytically in Harvard Business Review:
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azgreg said:
I think it shows that if a company takes care of it's employees their moral is higher and they are more productive. Too bad more companies don't recognize this.
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Agreed. Fortunately, so long as we maintain capitalism, competition between firms will result in those more productive, more successful firms beating out their competition, and replacing them.
 
cpwill said:
Agreed. Fortunately, so long as we maintain capitalism, competition between firms will result in those more productive, more successful firms beating out their competition, and replacing them.
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"Maintain capitalism"? The current system we have in place, where the government subsidizes Walmart employees' inadequate wages with welfare and medicaid, is most definitely NOT capitalism. Its ****ty socialism.
 
ChunkySalsa said:
"Maintain capitalism"? The current system we have in place, where the government subsidizes Walmart employees' inadequate wages with welfare and medicaid, is most definitely NOT capitalism. Its ****ty socialism.
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:shrug: I don't see a particular reason why the existence of a social safety net needs to be incompatible with free market competition.
 
haymarket said:
I know these people. The owner of one station admits that all three keep their prices the same so that they all make money. He says that the occasional past price wars are simply destructive and cause nobody to make money.

This is the real world and not the abstract world of economic 101 theory. This is how it really works out there.
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And yet you can go places and see different gas prices on every corner. Go figure.
 
Ahlevah said:
Fair enough. I find it interesting that the company bases its company-wide employee compensation packages on the collective bargaining agreements it negotiates on a three-year cycle. Presumably, this comes from Costco management's conclusion that this makes good business sense by reducing employee turnover and theft. (After all, if workers love you, or at least like you, they're less likely to leave or steal from you.) Paying a higher wage would also, I think, help keep meddling unions at bay. That probably figures into management's calculus somewhere.
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I've stated this earlier in the thread but the boss at Costco has said before that that's exactly why he pays his employees so well. Wall Street gives him loads of crap for doing it but his retort is, (paraphrased) "I don't have the shrink loss my competitors do and I don't have the turnover and training costs that my competitors do."
 
poweRob said:
I've stated this earlier in the thread but the boss at Costco has said before that that's exactly why he pays his employees so well. Wall Street gives him loads of crap for doing it but his retort is, (paraphrased) "I don't have the shrink loss my competitors do and I don't have the turnover and training costs that my competitors do."
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I just wonder how much the union threat plays into this, however, considering that many of the company's stores are located in union-friendly states like California. They always have to deal with the thought that if they get too stingy a union like the UFCW will attempt to organize their stores and interfere with company operational issues. So where does truth meet public relations, you know what I mean? I don't think Wal-Mart has this problem to the degree Costco does since so many Sam's stores are located in right-to-work states.
 
Ahlevah said:
I just wonder how much the union threat plays into this, however, considering that many of the company's stores are located in union-friendly states like California. They always have to deal with the thought that if they get too stingy a union like the UFCW will attempt to organize their stores and interfere with company operational issues. So where does truth meet public relations, you know what I mean? I don't think Wal-Mart has this problem to the degree Costco does since so many Sam's stores are located in right-to-work states.
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I don't think the guy feels pressured by unions because he seems to be doing it the way he wants it to be but I wouldn't doubt if he looks to unions to find the standard/level by which he wants to be at.

And speaking of WalMart stores in California...

California To Wal-Mart: Enough! No More Taxpayer Subsidized Profits For You

With Medicaid eligibility about to be expanded in some 30 states, as a result of the Affordable Care Act, Wal-Mart has responded by cutting employee hours—and thereby wages—even further in order to push more of their workers into state Medicaid programs and increase Wal-Mart profits. Good news for Wal-Mart shareholders and senior management earning the big bucks—not so good for the taxpayers who will now be expected to contribute even larger amounts of money to subsidize Wal-Mart’s burgeoning profits.

Legislation is now making its way through the California legislature—with the support of consumer groups, unions and, interestingly, physicians—that would levy a fine of up to $6,000 on employers like Wal-Mart for every full-time employee that ends up on the state’s Medi-Cal program—the California incarnation of Medicaid.

The amount of the fine is no coincidence.

A report released last week by the Democratic staff of the U.S. House Committee on Education and the Workforce, estimates that the cost of Wal-Mart’s failure to adequately pay its employees could total about $5,815 per employee each and every year of employment.​
 
poweRob said:
I don't think the guy feels pressured by unions because he seems to be doing it the way he wants it to be but I wouldn't doubt if he looks to unions to find the standard/level by which he wants to be at.

And speaking of WalMart stores in California...

California To Wal-Mart: Enough! No More Taxpayer Subsidized Profits For You

With Medicaid eligibility about to be expanded in some 30 states, as a result of the Affordable Care Act, Wal-Mart has responded by cutting employee hours—and thereby wages—even further in order to push more of their workers into state Medicaid programs and increase Wal-Mart profits. Good news for Wal-Mart shareholders and senior management earning the big bucks—not so good for the taxpayers who will now be expected to contribute even larger amounts of money to subsidize Wal-Mart’s burgeoning profits.

Legislation is now making its way through the California legislature—with the support of consumer groups, unions and, interestingly, physicians—that would levy a fine of up to $6,000 on employers like Wal-Mart for every full-time employee that ends up on the state’s Medi-Cal program—the California incarnation of Medicaid.

The amount of the fine is no coincidence.

A report released last week by the Democratic staff of the U.S. House Committee on Education and the Workforce, estimates that the cost of Wal-Mart’s failure to adequately pay its employees could total about $5,815 per employee each and every year of employment.​
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I doubt that would pass constitutional muster. If it does? Congress should raise the minimum wage to whatever amount is necessary. You know, like if a single guy works there? He makes a certain amount per hour. If it's a married guy with three kids? He gets paid a different wage for the same job. Yeah, that makes sense.
 
Why hasn't capitalism done it yet then?

cpwill said:
Agreed. Fortunately, so long as we maintain capitalism, competition between firms will result in those more productive, more successful firms beating out their competition, and replacing them.
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That's amazing. They should make the.company pay so the taxpayers don't have to. Gee, talk about a corporation trying to abuse the system and make the government pay their expenses.

poweRob said:
I don't think the guy feels pressured by unions because he seems to be doing it the way he wants it to be but I wouldn't doubt if he looks to unions to find the standard/level by which he wants to be at.

And speaking of WalMart stores in California...

California To Wal-Mart: Enough! No More Taxpayer Subsidized Profits For You

With Medicaid eligibility about to be expanded in some 30 states, as a result of the Affordable Care Act, Wal-Mart has responded by cutting employee hours—and thereby wages—even further in order to push more of their workers into state Medicaid programs and increase Wal-Mart profits. Good news for Wal-Mart shareholders and senior management earning the big bucks—not so good for the taxpayers who will now be expected to contribute even larger amounts of money to subsidize Wal-Mart’s burgeoning profits.

Legislation is now making its way through the California legislature—with the support of consumer groups, unions and, interestingly, physicians—that would levy a fine of up to $6,000 on employers like Wal-Mart for every full-time employee that ends up on the state’s Medi-Cal program—the California incarnation of Medicaid.

The amount of the fine is no coincidence.

A report released last week by the Democratic staff of the U.S. House Committee on Education and the Workforce, estimates that the cost of Wal-Mart’s failure to adequately pay its employees could total about $5,815 per employee each and every year of employment.​
Click to expand...
 
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