Explaining Costco's Success

In the following video, the Fool's Austin Smith chats with Costco's new CEO, Craig Jelinek. Jelinek first joined the company as a warehouse manager in 1984 and quickly rose to become a regional manager. After moving through various executive posts over the years, he became president and COO in 2010, and he ultimately took over from longtime CEO Jim Sinegal in January 2012.

Jelinek describes the metrics Costco uses in evaluating its own progress, and the company's straightforward value-based approach to long-term success.

To watch the full interview, click here.

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Austin Smith: How do you, personally, evaluate the success of Costco?

Craig Jelinek: I think there's a couple things. You can evaluate ... success is a lot of different things to a lot of different people. I think if you look at it, that if you can continue to provide value to the consumer, your business is going to continue to grow.

If your business continues to grow, you're going to provide opportunity for your employees. If you can provide opportunity for your employees, your employees are also going to be able to grow, they're going to be able to support their families, and enjoy a better quality of life.

If those things happen, you will just continue to reward the shareholders. Our whole view is, I want to be able to go in the food court, 25 years from now when I'm old with my walker, and sit down and say, "I remember you when," to some of our employees.

That's very important, to be able to create a company long-term that's going to continue to grow and provide opportunities. Yet you'll do that by taking care of the member and creating them great value.

Smith: In the evaluation of Costco from your perspective, are there any metrics that you look at that investors may not necessarily be aware of? Same-store sales is one of the obvious metrics to look at in retail, but what do you look at internally, in evaluating Costco's success?

Jelinek: Well, certainly you look at your comp business. You also look at your renewal rate. That's very important. We also try to look at the growth that we see. We're always measuring.

We think the model will work, as it has worked in a lot of other countries. No matter what country you live in, you want to be able to buy merchandise at the best possible price, so we certainly are looking at that.

Our employee turnover -- which is less than 1% at the management level, and less than 5% in the overall hourly level -- I think is a very important piece for us, which talks about employee satisfaction.

Those are some of the things that we always look at.


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