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Costco is Yahoo Finance’s Company of the Year

Yahoo Finance unveils its 2022 Company of the Year: Costco.

Video Transcript

- Let's get to the top three things you need to know as the clock hits 9:00 AM. We've got the big reveal. Yahoo Finance has crowned the 2022 Company of the Year. We're going to bring you the details, plus interviews with top executives all day here at Yahoo Finance. You don't want to miss it.

- Oh my. I wonder who it is. But first, a check on the markets. Futures are slightly in the red here to start the week after a better than expected jobs report on Friday casts doubt on how quickly the Fed can ease the pace of interest rate hikes.

- Plus, stocks in Hong Kong and mainland China are in rally mode after local authorities took more steps to ease COVID-19 policies, giving hope of a full reopening in China.

- But we begin today with my favorite story. The end of the year is upon us. And that means Yahoo Finance, we have unveiled or officially announced its 2022 Company of the Year. The land of $1.50 hot dogs and unmatched customer loyalty takes the crown this year. And you guessed it, it's Costco, folks. I flew out to the Costco stomping grounds in Washington to go inside the retailer's business. Here's what I learned.

Costco has seen a lot since opening its first warehouse store in Seattle, Washington in 1983. Seven presidents, the aftershock of the early 1980s inflation and subsequent sky high interest rates, the Great Recession, and more recently a health pandemic the likes of which many have never lived through before. Yet today, Costco has more than 842 locations in operation spanning 14 countries. For the year ended August 28, 2022, Costco hauled in an astounding $227 billion in sales.

The company has triumphed in its nearly 40 years since that first store opening. And some retail watchers would argue that out of all the turbulent economic cycles Costco has endured since its founding, 2022 was its most volatile.

- Shoppers are adjusting their spending habits.

- It makes for a little bit of a tougher holiday for the consumer.

- You're in a full on inventory crisis as we go into the holiday.

- It's a horribly challenging environment.

- But it was also a great example of the power of a Costco business model that has historically rewarded both shareholders and the members that walk into its enormous warehouses.

- We've been members for like 20 years. And we love coming to Costco.

- We do get the value of the membership. That's for sure.

- It's easy. And there's everything here.

- Craig Jelinek has been Costco CEO since 2012. And I caught up with him at the opening of the company's latest warehouse some 45 minutes north of Seattle. What is the ticket or key to your success in your view?

CRAIG JELINEK: Well, I think it's just exciting merchandise. We've always been known that everyone likes to talk about our treasure hunt. You better buy it now because it may not be there tomorrow. But I think creating high quality goods that are great value. That's what we do.

- In a year of eye-popping inflation for everything from gas to eggs hammering households, the retail warehouse giant opted not to raise the cost of a membership, even as rival Sam's Club did. Costco served up some of the cheapest gas prices in town when prices at the pump were sizzling in the summer months. The company was often the last grocer to raise prices on households despite biting price hikes from its vendors.

To top it off the Washington-based retailer kept the price of its legendary hot dog and soda combo intact in a year of high inflation and also continued to offer employees, some of the best compensation packages in all of retail. For all its efforts, Costco was rewarded with impressive sales gains seemingly every month of the year, a stock price that relatively outperformed the S&P 500, and Yahoo Finance's coveted Company of the Year Award.

Of course, hat tip to Costco, but also a hat tip to Yahoo Finance team. We have a lot of content now on the Yahoo Finance homepage. We have a lot of content rolling out this week. This is a heavy lift to get out these type of projects. So my hat's off to them. But it was interesting. So I spent the day in this new Lake Stevens Costco store in Washington. And I asked them, why are you opening up this store seemingly in the middle of nowhere? They have a store 10 miles away that is now pulling in $400 million a year in annual sales. Just one Costco store. And he said, we need a store to take that overflow traffic. So what Costco do? 10 miles away they open up another store. And it was packed by about 11 o'clock.

- Yeah. We've seen a huge shift in the consumer sentiment around where they're trying to find deals, where they can buy in bulk perhaps and be able to save on a per unit cost. Costco plays right into that. We've seen similarly some of the success within this broader category too. You look through some of the numbers that even Walmart has put out for Sam's Club this year. This has been a year for growth for the category of a Costco, getting company of the year here. Huge honor. And, ultimately, we'll see what type of overflow we see into 2023 given some of the economic signals that we've seen thus far and where consumers could be even more cost conscious there.

- I mean, that said, Costco has had some speed bumps, right, to your point that you were talking about in the package. I mean, the stock is still down on the year, is it not?

- It got hit last week when they reported those November sales. And the analysts-- and I go a little bit into this in the Morning Brief newsletter. This is stock that for as long as I've been covering it, maybe close to 20 years, has always been priced for perfection. What does that mean? It trades at a richer valuation to the broader market. And that means every quarter, every month, Costco has to do amazing things. And what they showed last week is their sales slowed down month over month. And I talked to the CEO. And he said, we're seeing some slowing in key parts of the business like TVs and jewelry. And the Street doesn't want to hear that stuff.

- Yeah. It's also in the international segment, too, where they're seeing some of that slowdown. And they acknowledge that. This is a company that does actually give us results on a more frequent cadence than just quarterly. We get monthly numbers from Costco too. And so that really showed up in not just the e-commerce segment, but in some of the other international categories that where they're actually over the past four weeks seeing declines of about 1%. And then that, ultimately, as I was mentioning the e-commerce number, that was actually down over the past four weeks by about 10% for the month too.

- I'm looking back over the past 20 years of Costco stock performance. In the past 20 years, 3 down years.

- Wow. It's a beast. One thing I was reminded of, too, the treasure hunt mentality in this store. It's not just cheap stuff. They were selling $2,000 bottles of wine, $3,000 electric scooters. All the stuff is in Costco. And it's buried on their website. But when you go in there, you see these more expensive luxury goods.

- It's a good place to get some cheap golf balls, though.

- I didn't buy you a bottle.

- I still have not gotten my-- I moved to the suburbs. It has now been two years since I moved to the suburbs.

- You're holding out.

- I still haven't gotten the Costco membership. I don't know why. There's just a lot of other things to have to worry about. And to get it a Costco might have another store to have to go to.

- You be you. You be you, Julie.

- I don't know. Maybe eventually I'll do it. We'll see we'll see what happens.

- We're going to keep a close eye on shares of Costco here. But once again, that's our Company of the Year.