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Complaints Over Costco's Treatment of Employees

March 29, 2004

By George Anderson

According to a piece in the Seattle Post-Intelligencer, analysts have a complaint with Costco. The company "treats its employees and cardholders better than it does investors."

Costco employees like Karin Powell agree.

"We're his (Costco's chief executive Jim Sinegal) top priority," says Ms. Powell.

According to Mr. Sinegal, Costco employees are "entitled to buy homes and live in reasonably nice neighborhoods and send their children to school."

Costco is known for treating its employees well, with cashiers earning in the vicinity of $44,000 including bonuses after only four years on the job. The company is also generous with benefits where, for example, it picks up 92 percent of employee medical costs.

The company's commitment to its own has paid off with turnover rates well below that which is typical in retail. Turnover of full-time staff at Costco is 23 percent, compared to the 66.1 percent industry average determined by the National Retail Federation (NRF).

Costco's Sinegal disagrees with those who think the company spends too much on its employees.

"You've got to want to get the very best people that you can and you want to be able to keep them and provide some job security for them. That's not just altruism. In the final analysis, it's good business."

Moderator's Comment: In light of rising costs, such as in the case of medical benefits, will Costco find itself being forced to be less generous with employees to remain competitive?

According to the Seattle Post-Intelligencer report, Costco makes 1.7 cents on every dollar in sales compared to 3.3 cents for Wal-Mart.

"Analysts polled by Thomson Financial expect Costco's bottom line to rise 15 percent this year with earnings per share of $1.75. Annual revenue is forecast to increase by 11 percent to $47.2 billion." - George Anderson - Moderator

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