Wednesday, November 6, 2019

Sustainability at "the Costco"

Costco wholesale club continues to impress. While many other retailers are struggling to stay alive and relevant, Costco keeps chugging along at a 7% sales growth and an impressive 36 Price/Earnings ratio (32 PE based on foretasted earnings), a PE ratio reserved for rapid growing tech companies not the single digit PE where most retailers find themselves. Investors like this safe, rather counter-cyclical, recession-resistant steady growth company(NASDAQ: COST). Note the huge 4.7 PEG rate (multiple of PE to 5-year growth rate) suggesting an over-priced stock. But the company itself is impressive. At $300 per share and a market cap of $132B Costco continues to push all time highs.

Costco is also a big proponent of sustainability. In terms of paper and wood products (and the related requirements for their suppliers and Kirkland-branded products). Read about Sustainable forest products in November 2019 Costco Connection. As a wholesaler/retailer, Costco has to work through their supply chain, especially with the Kirkland-branded products. As it pertains to wood/paper/tissue, they are working through the certification organizations for trees, forest, etc.
"We believe that the best first step is to source these products from responsibly managed and certified forests. To achieve this, we employ forest management certifications through three leading groups: the Forest Stewardship Council (FSC), the Sustainable Forestry Initiative (SFI) and the Programme for the Endorsement of Forest Certification (PEFC), with a preference for FSC. Products that have these certifications have met strict standards to support sustainable forests."

Costco continues to push for better, more sustainable products. You don't have to go to the "organic" section of the store. Because of their buying power, you don't have to pay the Whole Foods' prices to get quality, organic foods. Each year, you find more and more shelves with the only options being "organic", "sustainably sourced", etc. You can spend less time reading the labels and more time packing your cart to the rafters!

The consumer has a cost-benefit and consumer-responsibility consideration. Is the special trip to Costco worth the extra time, and is buying a 5-year supply of something -- say toilet paper -- really the right way to purchase. We often car-pool and share. We don't need an entire box of printer paper, but dividing the box among 2 or 3 people works great. Kind of leaverage our buying power, while minimizing our footprint.

One thing that you gotta love about Costco, Starbuck's and other sustainably minded companies is their open statement about trying to figure it out together: "We do not have all of the answers, are learning as we go and seek continuous improvement."

[Costco's] Sustainability Principles
  • For Costco to thrive, the world needs to thrive. We are committed to doing our part to help.
  • We focus on issues related to our business and to where we can contribute to real, results-driven positive impact.
  • We do not have all of the answers, are learning as we go and seek continuous improvement.
[Costco's] Sustainability Responsibilities
  • Take care of our employees.
  • Support the communities where our employees and members live and work.
  • Operate efficiently and in an environmentally responsible manner.
  • Strategically source our merchandise in a sustainable manner.