[I've got a guest post today that comes in response to the articles being written in response to Costco's recent quarterly results statement. There's a new favourite theory amongst some analysts that Costco is going to have problems growing in the future because they aren't appealing to young people, specifically Millennials, enough. For those of you that aren't up on your generational breakdown, millennials are those born between 1980 and 2000, so people that are somewhere between 34 and 14 currently. I agree with the take that today's guest poster has on the subject and will be providing my 2¢ on this topic later this week. Much like Mike, I am interested in hearing what other Costco shoppers make of this theory on Costco's future.]
The other day I saw this article on Time’s website and while I hate to give this author’s article credibility by sharing it on AddictedToCostco.com, I wanted to share my opinions, have you add yours, and see what other viewers thought.
Despite Marketwatch.com’s report that revenue from membership is up 4.1% and same-store sales grew 5% in February, Mr. Tuttle focuses only on the negative, that Costco reported lower-than-expected earnings. They made a profit, but not as much as they hoped, but Mr. Tuttle doesn’t agree with Costco’s explanations.
From his opening salvo against the earnings report, the whole article has the argument that this earnings report is a result of not embracing the “millennial generation”, while he ignores the positive membership profile of members having an average household income of over $90,000/yr. Mr. Tuttle wants Costco to employ social media, despite the fact that Costco does not advertise and the fact that you cannot sell “Likes” on the trading floor. He claims that Costco is in trouble because millennials don’t have space for bulk purchases and are shunning cars, but doesn’t realize these issues do not affect members in the UK or South Korea, where cars and home square footage come at a much higher cost than in the majority of the United States.
That’s why I suspect Mr. Tuttle reacted to the report as an outsider, not a member, because Wall Street balks at anyone that doesn’t play by their rules (namely, shareholder profit at the top of every agenda and decision). He wants the company to be what he considers a more reliable investment that markets to every demographic, despite the fact that would change what most of us love about Costco. People like Mr. Tuttle don’t understand capping profit margins at 15% for member benefit, or only offering quality products that meet strict guidelines. He ignores the fact that Costco is still a profitable store, and instead expects that it must always be growing. He is a pessimist who doesn’t value Costco, so perhaps he would enjoy Sam’s Club more. I can only hope that the relatively-new CEO Mr. Jelinek listens to founder Sinegal rather than analysts like Mr. Tuttle.