Costco’s Hot Streak: 4 Million Pies, $100 Million in Gold Bars, $6.7 Billion to Investors

Costco is having a good year.

After reporting sales of $56.7 billion in the most recent quarter — a 6% increase from the same period last year — the retail titan told shareholders it made so much money it was returning $6.7 billion in profits to them in the form of a special, one-time dividend of $15 per share on Dec. 28.

Outgoing CEO Craig Jelinek attributed the company’s recent success to its low employee turnover, qualified workers, membership fees, good relations with suppliers and to selling a lot of "great, crazy things," like its signature gold bars.

Jelinek, who is stepping down Jan. 1, noted that it's Costco's fifth special dividend over 11 years.

"We continue to generate a lot of cash. We don't do a lot with our cash other than open more Costcos and give it back to our shareholders," he said in an interview on CNBC on Monday.

President and Chief Operating Officer Ron Vachris, who started as a forklift driver, is replacing Jelinek.

"Ron's been with the company for 40-plus years. He's been in every position in the company. He will take the company further in the future," Jelinek said.

Good benefits and competitive salaries keep employees from leaving, which Jelinek said saves Costco money on training and finding new workers.

“You're only as good as everybody around you,” Jelinek said. “We don't want to turn over a lot of employees.”

$100 Million in Gold Bars

Jelinek attributed some of the company's success to its creative buying team, who procure unique items shoppers can't easily get elsewhere. Costco, for instance, sold $100 million of its popular gold bars during the three months ended Nov. 26.

“We’ve got a great buying group,” he said. “We always want to separate ourselves and be a little bit different from everybody else.”

He said they are always on the hunt for "exciting" items, noting that they once sold caskets. The company sold a Babe Ruth autographed index card for $20,000 during the last quarter and has a Mickey Mantle autographed 1951 rookie card on sale online for $250,000, CFO Richard Galanti told investors on the company's earnings call Thursday.

"We've sold all sorts of great, crazy things and that seems to work for us," Jelinek said.

Low Margins, High Volume

Costco sold 4 million pies in the three days leading up to Thanksgiving, including 2.9 million pumpkin pies.

Costco makes money on its volume of sales, rather than its profit margin, he added.

“We're not a margin business,” Jelinek said. “We just want to sell a lot of stuff.”

When asked how Costco manages to keep prices low and still make a profit, the CEO said Costco’s income from membership fees is “part of the equation,” but also said the retailer negotiates well with suppliers.

“We have to negotiate good deals,” he said.

The retailer also keeps the number of brands on its shelves to a minimum and sells many of its own brands, keeping its own costs down, Jelinek said.

“You won’t find 10 peanut butters on our shelves, you might find two,” he said.