Tuesday, July 26, 2005

The Anti-Wal-Mart

The NYTs business section has a good profile on Costco Wholesale, which is particularly topical considering the current labor debate.

Unlike so many other retailers, Costco has declined Wal-Mart’s standing invitation to race to the bottom, opting instead to preserve a corporate structure that benefits workers, customers, and shareholders.

Besides paying considerably more than competitors, for example, Costco contributes generously to its workers' 401(k) plans, starting with 3 percent of salary the second year and rising to 9 percent after 25 years.

ITS insurance plans absorb most dental expenses, and part-time workers are eligible for health insurance after just six months on the job, compared with two years at Wal-Mart. Eighty-five percent of Costco's workers have health insurance, compared with less than half at Wal-Mart and Target.

Costco also has not shut out unions, as some of its rivals have. The Teamsters union, for example, represents 14,000 of Costco's 113,000 employees. "They gave us the best agreement of any retailer in the country," said Rome Aloise, the union's chief negotiator with Costco. The contract guarantees employees at least 25 hours of work a week, he said, and requires that at least half of a store's workers be full time.

Some analysts say that Costco’s generosity to its employees hurts the company’s shareholders, but the figures say otherwise.

Costco's stock price has risen more than 10 percent in the last 12 months, while Wal-Mart's has slipped 5 percent. Costco shares sell for almost 23 times expected earnings; at Wal-Mart the multiple is about 19.

It’s refreshing to see a big company like Costco prove that corporate responsibility and profitability are not mutually exclusive. Hopefully, it is a business model others will emulate.

--Matthew McCoy