CHICAGO, Jan. 4, 2012 /PRNewswire/ -- James Sinegal,
CEO of Costco Wholesale Corporation, has been named Morningstar's
2011 CEO of the Year. Morningstar, Inc. (NASDAQ: MORN), a leading
provider of independent investment research, annually recognizes a
chief executive who exhibits exemplary corporate stewardship,
demonstrates independent thinking, creates lasting value for
shareholders, and has put his or her stamp on an industry.
The two other nominees for Morningstar's 2011 CEO of the Year
award were Jeffrey Bezos of
Amazon.com and John Pinkerton of
Range Resources.
"This year's nominees each have added intrinsic value to the
companies they run," said Paul
Larson, chief equities strategist and editor of
Morningstar StockInvestor. "James
Sinegal, who has served as CEO since co-founding Costco in
1983, has created and maintained value for all company stakeholders
during his tenure. The average Costco employee is attractively
compensated relative to other retail workers, keeping employee
turnover low and productivity high. Although its top-notch benefits
package and superior wages are costly on the surface, the firm is
reimbursed handsomely, generating more than $500,000 in sales per employee.
"At the same time, the company remains a low-cost producer for
its customers. Costco also has reasonable management compensation
levels and a high level of communication and transparency with
investors. The company has grown considerably over the last few
decades and we think it's well positioned to continue expanding
internationally."
While the total annualized return of the S&P 500 has been
nearly flat over the last five years, Costco shareholders have seen
a return of nearly 12 percent annualized over the same period.
Notably, in fiscal 2011, Sinegal helped Costco achieve
comparable-club sales of 10%, 10 basis points of operating margin
expansion to 2.8%, a 14.2% return on invested capital, and more
than $1 billion returned to
shareholders in repurchases and dividends.
Under Sinegal's leadership, Costco has established an enviable
position among retailers:
- With a high-quality selection at rock-bottom prices that makes
Costco a relevant shopping destination for consumers and small
businesses alike, Morningstar believes the company is poised to
capture incremental market share from other retail channels as
consumers look for ways to stretch their budgets during a
post-recessionary environment.
- Costco continues to generate healthy increases in club traffic,
suggesting that consumers may be reluctant to return to traditional
retailers and grocers as economic conditions further
stabilize.
- The company converts its inventory into cash before payments
are due to suppliers, an efficiency that leads to returns on
invested capital that are exceptionally high for a warehouse club
chain.
- With about 600 clubs worldwide and the early success of
warehouse clubs in markets outside the
United States, Costco has attractive global growth
opportunities, and international expansion will be one of the
company's growth engines going forward.
"We consider Costco to have an 'economic moat,' or set of
sustainable competitive advantages, in light of its considerable
bargaining power, significant economies of scale, and brand that is
synonymous with low prices," Larson added. "Although competition
with mass merchants is fierce, we believe favorable pricing from
suppliers and industry-leading inventory turnover will allow Costco
to consistently generate positive profits over time. As long as
management continues to align the company's product assortment with
consumer demand and allocate capital wisely, we see few reasons why
Costco's already narrow economic moat won't expand."
Morningstar's Economic Moat™ rating is a proprietary measure of
a company's sustainable competitive advantages, and Morningstar
assigns each company a rating of Wide, Narrow, or None. An economic
moat can be obtained through five primary sources: Efficient Scale,
a limited market where there is little incentive for new entrants;
Network Effect, a situation where incremental customers add value
for existing customers; Cost Advantage; Intangible Assets such as
patents or strong brands; and Switching Costs for customers.
Morningstar also evaluates a company's "moat trend," which
indicates whether its Economic Moat is strengthening or
weakening.
Morningstar introduced its CEO of the Year award in January 2000. Winners are chosen by Morningstar
equity analysts based on their in-depth independent research.
For Morningstar's commentary about Sinegal, go to:
http://www.morningstar.com/goto/ceo2011.
For the complete list of past winners, go to:
http://corporate.morningstar.com/CEOhalloffame.
About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent
investment research in North
America, Europe,
Australia, and Asia. The company offers an extensive line of
products and services for individuals, financial advisors, and
institutions. Morningstar provides data on approximately 330,000
investment offerings, including stocks, mutual funds, and similar
vehicles, along with real-time global market data on more than 5
million equities, indexes, futures, options, commodities, and
precious metals, in addition to foreign exchange and Treasury
markets. Morningstar also offers investment management services
through its registered investment advisor subsidiaries and has more
than $167 billion in assets under
advisement and management as of Sept. 30,
2011. The company has operations in 26 countries.
©2012 Morningstar, Inc. All Rights Reserved.
MORN-C
Media Contact:
Carling Spelhaug, 312-696-6150 or
carling.spelhaug@morningstar.com
SOURCE Morningstar, Inc.