Few companies have the stability at the top that Costco (COST) – Get Costco Wholesale Corporation Report does. CEO Craig Jelinek has held the position since 2012 and had a long run with the company before he ascended to the top job.
CFO Richard Galanti, who leads the company’s earnings calls, has held his job even longer. He became the warehouse club’s chief financial officer in January 1985. That’s a CEO who has been in place for 20 years supported by a CFO who has held his position for roughly 37 years.
Few companies enjoy that kind of stability, but having decades without a major change in the C-suite does lead to questions as to what will happen when the current team steps down, retires, or, sadly, passes on.
Those aren’t unreasonable possibilities given the ages of the executives involved. And, until recently, Costco has not had any sort of clear succession plan. The company’s latest move suggests that may have changed.
Costco May Have Its Next CEO
The warehouse club has promoted Ron Vachris to president and chief operating officer, effective Feb. 2. The new position was confirmed in an 8-K filing with the Securities and Exchange Commission last week.
Costco is known for playing its cards close to the vest, so it’s unclear if this move will portend any further leadership changes, but that isn’t stopping observers from wondering if Vachris is being eyed for an even bigger position down the line.
The 56-year-old Vachris will also join Costco’s board of directors. He has been with the company since 2010 in a variety of positions. Since 2016, he has been the executive vice president and chief operating officer for merchandising. From August 2015 to June 2016, he was senior VP of real estate development. From 2010 to 2015, he was senior VP and general manager of Costco’s northwest region.
Vachris began his career in retail with The Price Company in 1982, and got started with the Costco organization through its integration with The Price Club in the wake of the companies’ 1993 merger. He began his retail career in 1982 with The Price Company.
He will be taking over the position previously held by CEO Craig Jelinek, who will remain as chief executive and as a board member. In 2012, Jelinek took over the CEO position from Costco co-founder Jim Sinegal.
What Does This Mean For Costco’s Future?
Observers such as the industry resource Progressive Grocer are wondering about the longer-term implications of Vachris’ promotion, saying that the appointment “puts him in the spot to succeed Jelinek, 69, who has led the chain since 2012.”
But any change might still be some time away. As Morgan Stanley analyst Simeon Gutman wrote in a research note cited in a report on Monday from financial journal Barron’s, “this is not an official announcement of a CEO succession plan, but it implies a plan is taking shape.”
Costco is a company that built its reputation on stability, not taking risks, garnering a loyal following, and weathering the ongoing rise of e-commerce by creating a destination store where people tend to shop for hours.
As a Grocery Dive analysis from five years ago put it, “when it comes to Costco, the age-old saying, ‘If it ain’t broke, don’t fix it’ certainly comes to mind,” it notes, adding that “Still, industry experts have called on the company to take online ordering and delivery more seriously.”
Costco is slow to make changes to its stores or in its upper management, where changes are equally rare. Before he took the CEO position, Craig Jelinek was with the company for 37 years.
Costco’s slow-and-steady approach seems to work for it, as it recently reported that total sales rose 9.5% in the United States and customer traffic rose 7.%, and on Jan. 30, 2022, the company reported net sales of $92.1 billion, an increase of 16.4% from $79.11 billion last year.