To determine our Company of the Year, Yahoo Finance gauges financial performance, leadership chops, societal impact and buzzy factors such as consumer appeal. So why Costco (COST) in 2022?
If profitability and stock-price appreciation were the only factors, we might have chosen an energy company. When we began our selection process in late October, oil and gas firms dominated the financial metrics. Consol Energy, for one, was up 183% year-to-date. Occidental Petroleum: Up 146%. Hess: Up 83%. Exxon Mobil: Up 73%. Nearly 80% of the companies in the S&P 1500 stock index, by contrast, were down for the year.
But did those skyrocketing oil and gas firms do anything innovative or momentous? Not really. Big Oil is having a great year, but only because oil and natural gas prices happen to be expensive this year.
With that out of the way, we looked for other companies that stood out amid the highest inflation in 40 years and a lousy environment for stocks. As consumers battled the soaring cost of gasoline, groceries and appliances, Costco may have done more than any other U.S. company to help Americans stretch their paychecks. Profit rose 17% even as the company held the line on price hikes. Wall Street analysts praise Costco's crisp execution and rate the stock as outperform, according to Capital IQ. The stock is down 13% this year, as of Dec. 2, but that still beats the S&P 500 by a couple percentage points. Not bad in a lousy market.
Inflation peaked at 9% in 2022, the highest level in Costco's 38-year history. Its "wholesale" model—spartan stores stacked with bulk items—has never been more appealing to shoppers. The company’s membership renewal rate hit a record high this fall, a sign shoppers love and need the deals. Its gasoline prices are the cheapest in the country, according to GasBuddy. Costco seems to be benefiting more than other retailers from consumers' flight to bargains. Its 3-year compound annual growth rate for both revenue and profit handily beats that of competitors Walmart and Target, according to data from S&P Capital IQ.
We also include qualitative factors in our best-company pick, such as employee morale and good corporate citizenship. In a retail sector characterized by high turnover and middling pay, Costco earns high marks for its treatment of employees, including starting pay of $17 per hour, health benefits, plus bonuses and perks for working weekends. Workplace analysts credit Costco with setting labor standards competitors such as Walmart, Target and Amazon are slowly adopting. The company also has a reputation for family work culture even though it's the 13th biggest public company in the nation, ranked by revenue.
“Costco is maybe the most fun, boring company there is,” one Yahoo Finance staffer wrote in our best-company Slack channel. “Costco is the ultimate recession play,” wrote another, “offering value at a time when consumers are stretched.”
In a challenging year, that’s about as innovative and momentous as it needs to be.
More Yahoo Finance Company of the Year 2022 coverage:
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Twitter at @rickjnewman
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