Jim Sinegal, the quirky, hugely successful chief executive will retire from the company he founded, Costco Inc., effective January 1, 2012. He will be replaced by Craig Jelinek, 59, currently president and CEO of the Issaquah, WA club store retailer. Jelinek was elected to that post in February 2010 when the Costco’s board established an “office of the president” to coordinate major company matters. According to Costco, Jelinek and Sinegal have worked hand in hand over the last 18 months in that role, along with Jeff Brotman, chairman of the board.
Jelinek is a 28-year Costco veteran who began his career as a warehouse manager in 1984 in Costco’s early years. He subsequently has served in every major role related to Costco’s business operations and merchandising activities during his tenure.
“Costco has a very strong culture and a deep bench of management talent,” said Sinegal. “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 will remain with Costco through January 2013, serving in an advisory role and assisting Jelinek during the transition. He will also continue to serve on the board of directors and will stand for re-election at the January 2012 annual meeting.
The upcoming retirement of Jim Sinegal, who will be 76 on New Year’s Day next year, marks the end of one of the longest and most successful tenures of leadership in all segments of retailing.
He started as a bagger at the old FedMart discount operation (founded by industry legend Sol Price, the man who pioneered the club store concept and who later founded Price Club) in 1954. At FedMart, he progressed through the ranks to become executive vice president in charge of merchandising and operations. After leaving Price Club for a period, he was vice president of merchandising for Builders Emporium from 1977 to 1978. From 1979 to 1983, he worked with Sinegal/Chamberlain and Associates, a brokerage firm. Together with Seattle retailer Jeff Brotman, he co-founded Costco in 1983, becoming president and CEO of what would become the nation’s largest club retailer. His innovations made Costco the first warehouse club to include fresh food, eye-care clinics, pharmacies, and gas stations.
In 1993, after Sam’s Club (Wal-Mart) threatened to take over Costco, Sinegal and Sol Price’s son, Robert (CEO of Price Club), merged their companies. Sinegal became the CEO and Robert Price was named chairman of PriceCostco Inc. The merger was a rocky one from the outset and in 1994, Price left to start Price Enterprises, which was formed from PriceCostco’s international development holdings.
In published interviews, Sinegal has stated that he was not interested in Wall Street analysts who took issue with his care for employees and customers rather than happier shareholders. Investors might want higher earnings, but Sinegal said, “We want to build a company that will still be here 50 and 60 years from now.”
Sinegal is also famous for seeking only modest compensation compared to other “new age” CEOs who have earned millions annually for mediocre or poor performances and whose tenures are relatively brief. Last year Sinegal earned $3.5 million ($350,000 in base salary, the remainder in performance driven bonuses) for leading a company that earned $1.3 billion on annual sales of nearly $78 billion.
In an interview published on August 31 in the Seattle Times, Jelinek, who also began his career at FedMart, said this about his mentor: “We’re both good with people, and we have the same values in terms of running the business.” Jelinek only learned in late August about Sinegal’s decision to step down.
In related Costco news, the company reported net sales for the fiscal 2011 fourth quarter for the 16 weeks ended August 28, 2011, of $27.6 billion, an increase of 17 percent from $23.6 billion in the 16-week fourth quarter of fiscal 2010.
Net sales for the 52-week fiscal year 2011 were $87.0 billion, an increase of 14 percent from $76.3 billion in the 52-week fiscal year last year.
For the four weeks in the month of August, net sales were $6.9 billion, an increase of 17 percent from $5.9 billion during the similar period last year. Comparable U.S. sales for the period ended August 28, 2011 excluding gas rose six percent.
Costco plans to release its operating results for the fourth quarter (16 weeks) and for the fiscal year (52 weeks) ended August 28, 2011, on October 5, 2011.