Dive Brief:
- Costco Wholesale ushered in a new era Thursday with its newly-minted CFO Gary Millerchip hosting his first earnings call for the retailer. Net sales jumped 9.1% to $57.39 billion for the company’s fiscal third quarter ended May 12, up from $52.60 billion in the prior year period, according to a company release.
- During the call Millerchip, who succeeded the retailer’s longtime-CFO Richard Galanti in March, signaled the company was staying the course on the hot-button hot dog and soda combo pricing.
- “While I can't promise to be able to match the humor that Richard Galanti has become famous for, I can promise the same level of open dialogue and transparency you've come to expect. Oh, and to clear up some recent media speculation, I also want to confirm the $1.50 hot dog price is safe,” Millerchip said on the earnings call, according to a Seeking Alpha transcript.
Dive Insight:
Millerchip came to Costco with about 15 years experience at The Kroger Co., most recently serving for four years as CFO at the Cincinnati, Ohio-based grocery giant. Prior to Kroger, he logged about two years as head of personal cards at the Royal Bank of Scotland, according to his LinkedIn profile.
While Millerchip brings deep experience in retail to his new job, he arguably also has big shoes to fill: Galanti was steeped in the company’s culture, having served as Costco’s finance chief for nearly four decades. He was also warmly regarded by many analysts, coming to be known as the company’s “voice” to Wall Street due to the many earnings calls he presided over since joining the company back in 1984. During the fiscal second quarter earnings call in March, one analyst wished Galanti well, telling the then CFO that it felt like a "superstar is retiring", CFO Dive previously reported.
Millerchip’s arrival isn’t the only change in Costco’s C-suite. Ron Vachris, another decades-long company veteran, took the CEO seat in January and addressed the transition head-on during the call. Noting that he’d worked closely with his predecessor Craig Jelinek for years, he called the CEO transition “seamless.” Vachris also said he intended to have Millerchip host the quarterly calls as Galanti had done previously, adding that he would join “as business permits to answer a few questions.”
During the call, Millerchip also referred back to Galanti when asked by an analyst about whether the company would be raising membership fees, which have been held steady for longer than in the past. “I would really kind of revert back to some of the comments that Richard shared previously,” he said. “We've historically looked at increasing the membership fee every five years or so. And obviously, we're beyond that time period now in terms of what would be the typical cycle. There's nothing about anything that we see within how the business is performing that's changing our view on that.”
Some analysts said Millerchip struck a consistent tone on his first earnings call.
“With CEO Ron Vachris and new CFO Gary Millerchip anchoring the call, the voices were different but the message was the same: COSTCO's member-focused/value-driven flywheel continues to take share on multiple fronts, and the company is increasingly leveraging tech/data to enhance it's already considerable competitive advantages,” Baird analysts led by Peter Benedict wrote in a Thursday report.
Other than offering a slide deck presentation, Morningstar analyst Noah Rohr also said he didn’t think Millerchip handled the call much differently than Galanti.
“Millerchip and Vachris seemed to harp on Costco’s established business model and didn’t lay out much in the way of differentiated strategic plans,” Rohr wrote in an email response to questions. “It’s tough to argue with Costco’s historical business performance and I wouldn’t expect Vachris and Millerchip to pursue a radically different strategy in the future.”
