What Would Costco's CEO Do?

David Gardner: Jim, we are given to understand that Costco (Nasdaq: COST  ) offers excellent health coverage for its employees. How are you affording to do that, and why aren't more companies?

Jim Sinegal: Well, we are, just as every other company in America is, being challenged in the health-care arena. We have to pay attention to it. We are looking at alternatives. We are looking at all sorts of means where we can be creative and be better consumers of health care, and we are trying to get our employees to be better consumers of health care, but in the final analysis, our attitude is how can't you provide it for your employees? If you can't, what you are going to wind up doing is losing them or they are going to put themselves into a very difficult position, and we think that in the final analysis, when you do the right thing for your employees, it pays dividends, they are more productive and they are happier, and they don't leave you. Those are all nice things.

David Gardner: We are going to close with our game. Jim, you have played it before. It is "Buy, Sell, or Hold." We will be asking you not about stocks here but about things happening in the business world and say if they were stocks, would you be buying, selling, or holding right now and a sentence as to why. Are you ready?

Jim Sinegal: Uh-huh.

David Gardner: Let's start it off with the importance of China to your bottom line. Buy, sell, or hold?

Jim Sinegal: Buy.

David Gardner: Why?

Jim Sinegal: I think that we are going to continue to see vast improvement in the quality of products coming out of China and the number of products coming out of China, and I think that that is going to be an important element for our retail business, and we think also it is going to give us a great opportunity to sell goods over there.

David Gardner: The likelihood that Costco will offer auctions, either online or in your stores. Buy, sell, or hold?

Jim Sinegal: Hold. I am not sure where that is going, and we think we have enough on our plate at the moment.

David Gardner: Pick it up there, 3-2-1, go. The changing perception of America abroad over the next 10 years. Buy, sell, or hold?

Jim Sinegal: Well, I am not sure I know how to deal with that one. I guess I would say sell. I am hoping that we are going to improve our image overseas, so I guess I should have said buy, huh?

David Gardner: Or you could say you are cautiously ambivalent.

Jim Sinegal: I am cautiously optimistic. I am hopeful that we are going to recognize that we need to improve our image overseas and that we are going to do something about it and that other nations are going to recognize America for what we are and for what we stand for.

David Gardner: The significance of our trade deficit. Buy, sell, or hold?

Jim Sinegal: Sell.

David Gardner: Why?

Jim Sinegal: It has got to be corrected. I am not one of those people who believe that deficits don't matter. I think that there is some danger there, and I think that the money has to come from somewhere. I think it is going to endanger the entitlements, and I think it is going to have a significant impact on foreign investment in this country.

David Gardner: Just a couple more for you. Selling engagement rings at Costco. Buy, sell, or hold?

Jim Sinegal:(Laughs.) Buy. We have some great values, and if you are going to get a diamond, you are not going to find a better value anywhere than what you will find at Costco. Great quality, great prices.

David Gardner: You mentioned you travel a lot. Buy, sell, or hold flying in coach?

Jim Sinegal: Buy. There are some wonderful values that are available like Southwest Airlines (NYSE: LUV  ) that deals an awful lot in the markets where we do business is a great carrier.

David Gardner: Have you flown JetBlue (Nasdaq: JBLU  ) at any point?

Jim Sinegal: I have not.

David Gardner: Last one for you, Jim. The chance that Mount St. Helens, which is not so far away from you there in Issaquah, Washington, the chance that Mount St. Helens might dump some ash on somebody here in the next six months. Buy, sell, or hold?

Jim Sinegal: Buy. I think there is a good opportunity. I think this mound keeps building up, and there is a red glow there, so I think something is going to happen. Hopefully they are keeping everybody safe, but obviously there will be some sort of an eruption. In all likelihood, not as devastating as the one 25 or 30 years ago, but nonetheless there will be I think an eruption.

David Gardner: I think I am joined by many of my listeners when I ask ignorantly, how far away is Issaquah, Washington from Mount St. Helens?

Jim Sinegal: About 125 miles.

David Gardner: So a little too far to see the glow, but enough to maybe feel it.

Jim Sinegal: You might feel it, and you might see some ash.

David Gardner: Jim Sinegal is the CEO of Costco, and he joined us from the company's corporate headquarters in Issaquah, Washington. Jim Sinegal, thank you for joining us once again on The Motley Fool Radio Show.

Jim Sinegal: David, thanks for having me.

Catch up with the rest of this interview:

Costco is aMotley Fool Stock Advisorpick. Want to learn more? Subscribe today without risk for six months. The Motley Fool isinvestors writing for investors.


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