Former Costco leader Jim Sinegal is named CEO of the Year
January 4, 2012
By Warren Kagarise
NEW — 3:30 p.m. Jan. 4, 2012
Costco cofounder and former leader Jim Sinegal is Morningstar’s 2011 CEO of the Year, executives at the Chicago-based financial data provider announced Wednesday.
Sinegal stepped down as CEO of the Issaquah-based warehouse chain Jan. 1. Craig Jelinek, president and chief operating officer at the No. 3 retailer in the United States and the largest employer in Issaquah, succeeded Sinegal.
Morningstar recognizes a chief executive for showing exemplary corporate stewardship, independent thinking, lasting value for shareholders and leaving a legacy in his or her industry.
“James Sinegal, who has served as CEO since co-founding Costco in 1983, has created and maintained value for all company stakeholders during his tenure,” Paul Larson, chief equities strategist and editor of Morningstar StockInvestor, said in a statement. “The average Costco employee is attractively compensated relative to other retail workers, keeping employee turnover low and productivity high. Although its top-notch benefits package and superior wages are costly on the surface, the firm is reimbursed handsomely, generating more than $500,000 in sales per employee.”
Though Sinegal stepped down as CEO, he intends to remain at Costco through January 2013 to advise and assist Jelinek amid the transition. The outgoing CEO also plans to remain on the Costco board.
Sinegal transformed the company from a lone South Seattle warehouse almost 30 years ago to 592 outposts around the globe. In the mid-1990s, the company’s headquarters relocated from Kirkland to Issaquah.
“We consider Costco to have an ‘economic moat,’ or set of sustainable competitive advantages, in light of its considerable bargaining power, significant economies of scale, and brand that is synonymous with low prices,” Larson said. “Although competition with mass merchants is fierce, we believe favorable pricing from suppliers and industry-leading inventory turnover will allow Costco to consistently generate positive profits over time. As long as management continues to align the company’s product assortment with consumer demand and allocate capital wisely, we see few reasons why Costco’s already narrow economic moat won’t expand.”
Sinegal bested Jeffrey Bezos — founder of Seattle-based Amazon.com — and Range Resources leader John Pinkerton for the CEO of the Year title. Morningstar introduced the award in January 2000. The financial data provider chooses honorees based on in-depth, independent research.