Costco: Our Outlook and Ratings Are Unchanged as Ron Vachris to Succeed Craig Jelinek as CEO

Wide-moat Costco COST announced CEO Craig Jelinek’s intention to step down from the role at the end of the year, marking an imminent end to his impressive 12 years at the helm. Ron Vachris, Costco’s current president and COO, will officially succeed Jelinek on Jan. 1, 2024. The management change does not alter our long-term outlook for Costco, and we maintain our $460 fair value estimate and our Exemplary Capital Allocation Rating. Still, shares look overvalued to us.

Vachris’ appointment to the CEO role does not come as a surprise given that his promotion to president and COO in February 2022 mirrors Jelinek’s own ascension to the helm more than a decade prior. Vachris is a Costco veteran with several decades of experience at the firm, which is consistent with the rest of Costco’s executive suite who each boast long tenures with the company. We expect the firm to continue growing its global membership base and to capture greater spending from existing members due to its compelling merchandise assortment and low prices.

Upon succeeding cofounder Jim Sinegal as CEO in January 2012, Craig Jelinek has overseen several years of resounding growth that have since culminated in Costco’s status as the nation’s third-largest retailer. The firm’s top line grew by 170%, its market capitalization increased nearly seven-fold, and its paid members doubled to 71 million with Jelinek at the helm. Costco also expanded its physical footprint by over 250 units since 2012, bringing the firm’s global warehouse count to 861 today. Jelinek will serve in an advisory role through April 2024 and will remain on Costco’s board of directors.