Costco Discipline

A local company we all know and love, Costco Wholesale, announced its fiscal first quarter earnings on December 8. Earnings rose a healthy 13% compared with the year-ago quarter while same-store sales, the best measure of a retailer’s true (or “organic”) sales growth, grew a healthy 7%, above retail industry averages. Over the years, Costco has consistently delivered healthy growth throughout many varying economic conditions, a hallmark of a strong and well-managed company. This consistency of growth has benefitted both Costco customers and, obviously, its shareholders but it has not happened by accident. Over the years Costco has fostered a culture that has placed a high emphasis on discipline and sticking to that discipline: discipline in creating and implementing a sound business strategy; discipline and consistency in merchandising strategies; discipline in investments and store expansion; discipline in hiring and training; discipline in managing costs and passing those savings through to its customers.

The importance of discipline is no different when it comes to investing and financial planning. A good financial plan provides an important source of discipline that keeps one’s investments on track through the inevitable ups and downs of the financial markets. A plan provides not only a proper investment roadmap and asset allocation but also helps mitigate emotional reactions to the markets that can be so damaging to long-term wealth creation (i.e. buying and selling at exactly the wrong times). A cogent plan also helps to keep investors focused on long-term goals and not be tempted to “trade” or get sucked into the trend or hot sector of the day, also at exactly the wrong time. Yes, investors can take an important cue from a successful company like Costco: planning and the discipline of sticking with a sound plan can make a huge difference when it comes to long-term success in both business and investing. 

BT for S.R. Schill & Associates, Mercer Island, WA