Costco Wholesale has been the model of leadership consistency. The chain has only had three CEOs since it was founded in 1983.
Jim Sinegal led the company until he handed the top job over to Craig Jelinek in 2012. Jelinek, who had worked with his predecessor for many years before taking the CEO chair, followed the same model with Ron Vachris, who took over as CEO on Jan. 1.
Before taking the CEO job, Vachris had had a 40-year career at the company where he worked his way up from operating a forklift to being named president and COO in February 2022.
Related: Costco shares a new pricing policy members will love
Costco (COST) clearly values maintaining consistency. That made it a major surprise when Chief Financial Officer Richard Galanti, a man who held that position for nearly 40 years and served as the public face of the company, stepped down on March 15 to be replaced by an outsider.
Gary Millerchip, who previously held the same position at Kroger (KR) , took over from Galanti, but he won't be going it alone.
"Richard will remain with the Company through January 2025, serving in an advisory role, assisting Gary during the transition, and continuing on the Board of Directors," the warehouse club said in a news release.
Galanti has led all but one of the company's earnings calls since he took the CFO position, and the company's three CEOs were not present. With a new CEO and CFO, Galanti answered questions about the company's future and culture during his final earnings call as CFO.
Image source: Kevork Djansezian/Getty Images
Costco promises to keep its culture
Costco has been such a picture of consistency that Galanti's decision, which came just months after the CEO transition, was shocking. During the second-quarter earnings call, Galanti answered a probing question from Chuck Grom, an analyst at Gordon Haskett Research Advisors.
"My question is on culture. You've always said, it was customers first, employees second, shareholders third, and that philosophy has clearly played out. So looking at it, I'm curious how the new team is going to keep this culture intact and resist pressure from some of the non-founders of the company going forward," he asked.
Galanti did not pull any punches in his response.
"Well, first of all, nothing has changed. It's not unlike the same question I think that was asked of Jim Sinegal after 28 years before he retired. And before we knew who his successor was going to exactly be," he said.
He explained how the Costco board handled its first-ever CEO change.
"I remember the board asking (Jim), if you're 100 in terms of extreme value and taking care of the customer and the employee and everybody else, whoever takes your place, what would they be in? He paused for a minute and said, 'I have no doubt that will be at least in the mid-90s, if not higher," Galanti shared.
Jelinek delivered on that, which has set an ongoing tone.
"And frankly, after Craig was made (CEO) that, in my view, whatever that number was, it increased toward 100 just because that's what we do. And that culture is so ingrained here" he added.
Galanti talks about his Costco departure
Galanti has been an important part of Costco's culture as he has been a constant essentially since the warehouse club opened. He does not, however, believe he's irreplaceable.
"And when we talk about changing management, I always joke when people ask me as CFO how I'm important — am I important to the strategic whatever of the company? The fact is we're run by merchants and operators, and we're there to serve and help them and certainly add our voice," he added.
That's the chain's secret, he said. It's not about how the executive operates, but the core values of the company
"But the fact of the matter is, and Craig for 12 years and now and Ron, you have people that have been here for 35, 40 years and were born and raised and have grown up in this culture. And it is so intact. Just last week when Gary joined us, he had to go through the required two-hour Costco orientation, which includes to take care of your customer, take care of your employees, they respect your supplier," Galanti added.
Costco stock is up over 23,000% since the company went public in 1984. Shares in the warehouse club have climbed nearly 49% over the past 12 months.
The shares closed March 15 at $725.63, off 0.9% , but up 9.9% on the year.
