Costco shareholder proposals fall short; hot-dog sales do not
Costco offered up the usual array of astonishing statistics at its annual meeting Thursday, but shareholders did not deliver the numbers to pass a measure that would have given them more influence over the retailer’s corporate governance.
Seattle Times business reporter
Costco offered up the usual array of astonishing statistics at its annual meeting Thursday, but shareholders did not deliver the numbers to change how often board members are elected.
Company chairman Jeff Brotman told shareholders a measure seeking to declassify the board — that is, to elect all of the board’s directors annually instead of having them serve staggered three-year periods — failed to garner enough support.
Another measure-- to lower the threshold for shareholder votes on all issues to a simple majority-- obtained shareholder approval. But it doesn’t mean the proposal will have any actual impact, as any changes to voting rules would have to be drafted by the board and then get the backing of two thirds of outstanding shares at a future election.
So it’s status quo for how things are run at the Issaquah-based giant.
The company didn’t disclose the exact percentage of the votes during the meeting, which was held in Bellevue. Chief financial officer Richard Galanti said that a majority of the votes cast favored electing all directors annually, but they fell short of the two-thirds of all shares the proposal needed to pass. “It’s a high hurdle,” he said.
The proxy-advisory firm ISS had recommended that Costco shareholders approve both the change to a simple majority and holding all directors accountable in annual elections.
The results underscore, nevertheless, how Costco’s management remains relatively popular with shareholders after delivering growth through the recession and defending its turf from online retailers.
Costco’s business model is also riding high after being praised by President Obama at Tuesday’s State of the Union address. That clearly resonated with faithful investors.
“They believe in treating their workforce properly,” said Andrea McCabe, one of the hundreds of shareholders who attended the meeting. “Can you deny it when the president of the United States praised Costco in the State of the Union?”
Costco posted higher than expected traffic during the holiday season, in which many retailers lost customers to the likes of Amazon.
Chief Executive Craig Jelinek told shareholders that “Amazon is going to be a very stiff competitor,” and that if Costco ever finds out that it’s financially feasible to bet more heavily on home delivery of products sold online, it will do so.
“Where we stand right now, we don’t think that’s something we need to get ourselves into,” he said.
Part of the reason for Costco’s success is that it offers consumers a wildly diverse bounty of deals, from cheap electronics to travel to fine wines. Gasoline sales, which were up 7 percent on a gallon basis, are key because they help boost store visits, Jelinek said.
Last year Costco sold 112 million hot dog and soda combos; 69 million rotisserie chickens and 114,000 carats of diamonds, including a $68,000 rock, Jelinek said. The company also experimented with a $699.99 bottle of 40-year-old single-malt Scotch sold under its Kirkland brand.
Jelinek said that in the three days before Thanksgiving, the company sold 17.4 million dinner rolls and 1.6 million pumpkin pies. “For some of you that may not be exciting, but that’s really exciting for me,” he said.
Not all businesses did well: Photo prints amounted to $800 million, a 10 percent drop. “Most people don’t get prints made anymore,” Jelinek said. “We’ll be making decisions in the future where we’ll really go with this business.”
Ángel González: 206-464-2250 or firstname.lastname@example.org. On Twitter: @gonzalezseattle
Information in this article, originally published on January 30, 2014, was corrected on January 31. A previous version incorrectly stated that two measures failed to pass at Costco’s shareholders meeting. One of the measures obtained shareholders’ approval, but would still need further approval before any changes take place.