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Originally published August 31, 2011 at 4:33 PM | Page modified September 2, 2011 at 10:52 AM

Corrected version

Costco's colorful CEO, co-founder Jim Sinegal to retire

Jim Sinegal, Costco's co-founder and longtime chief executive officer, jokes that being replaced by President and Chief Operating Officer Craig Jelinek "will be an upgrade."

Seattle Times business reporter

Jim Sinegal

Age: 75

Before Costco: Born in Pittsburgh, attended high school in Southern California, an area he still loves. Joined the discount chain Fed-Mart in 1954 as a bagger and became a protégé of its founder, Sol Price.

Founded Costco: With Seattle retailer Jeff Brotman, Sinegal started Costco in 1983 on Fourth Avenue South in Seattle. About five years later it moved to Kirkland, the origin of its "Kirkland Signature" private label name. Now based in Issaquah, it has 592 warehouses, 155,000 employees and annual revenues of $78 billion.

Pay: Earned $3.5 million, including stock awards, in the fiscal year ending August 2010.

Craig Jelinek

Age: 59

Before Costco: Grew up near Los Angeles and worked through college for Fed-Mart, which closed in the early '80s.

At Costco: Started in 1984 and opened its sixth warehouse, in Tukwila. Opened stores in Nevada and California before Costco merged in 1993 with Price Club, also founded by Sol Price. Jelinek then ran the Northwest region and in 2004 became the head of merchandising.

Pay: Earned $2.3 million, including stock awards, in the fiscal year ending August 2010.

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Even when Costco Wholesale co-founder and Chief Executive Officer Jim Sinegal talks about leaving the company he built into the country's third-largest retailer, he exudes his quirky mix of humble, frank and feisty.

"It'll be an upgrade," Sinegal joked about being replaced as CEO on Jan. 1 by President and Chief Operating Officer Craig Jelinek. "He is well-liked and smart and energetic and all the things that I used to be."

One of the most colorful personalities in retailing, Sinegal is known for his integrity, his unwillingness to squeeze customers or employees to please Wall Street, and his abiding love of $1.50 hot dogs.

He will turn 76 on Jan. 1 and plans to spend one more year working full time for Costco, helping with the CEO transition at the Issaquah-based company. "I'll advise when I'm asked and try not to interfere and meddle," he said.

After that year, Sinegal plans to stay on Costco's board of directors. The warehouse chain's other co-founder, Jeff Brotman, will remain as chairman.

Sinegal said his age and the fact that Costco is in good shape made January the right time to step down as CEO.

"This is a positive move for Costco, and I feel very good about it," he said. "Everybody says that, and it sounds like a lot of bull, but I mean it."

Sinegal is "an industry statesman," said Ed Weller, a senior research analyst at ThinkEquity in San Francisco who has known Sinegal since the mid-1980s.

"He's done an astounding job for an astounding period of time," he said. "He has been and will probably remain a force within the company and the industry."

Jelinek, 59, began as a Costco warehouse manager in 1984, and has served in major roles throughout Costco's business operations and merchandising activities.

His early 2010 promotion to the role of president — which had been one of Sinegal's titles — and chief operating officer indicated he was in line for the CEO spot.

"Not a lot's going to change," Jelinek said in a telephone interview.

He and Sinegal learned the discount business at California chains founded by Sol Price. They both worked at Fed-Mart, and Sinegal followed Price to Price Club, which merged with Costco in the early '90s.

"We're both good with people, and we have the same values in terms of running the business," said Jelinek, who learned about a week ago that Sinegal planned to retire.

"I felt that I was blessed, and it was an opportunity," Jelinek said. "This company's been a big part of my life, and this is what I do."

Since becoming president and COO last year, Jelinek has accompanied Sinegal to the opening of every Costco warehouse in the world.

Like Sinegal, he reveres the company's $1.50 hot dog, which comes with a soft drink and is sold in Costco warehouses worldwide.

Jelinek said he is not about to raise that price.

"Absolutely not," he said. "We haven't raised it in 26 years, and I don't see us raising it. That's a trademark of ours."

Sinegal steps down after seeing Costco through a recession in which other retailers slashed jobs, eliminated stores and went out of business.

Costco laid off no one, aside from its usual seasonal workers and extra people hired for new-store openings. It also refused to cut back on health benefits, despite rising costs and pressure from Wall Street — and Sinegal has steadfastly resisted marking up the company's prices on branded items any more than 14 percent.

Costco's sales and profits are rising, and its stock is near an all-time high.

It slowed the pace of new-store openings, largely because it had trouble finding sites as shopping-center developers and banks went out of business.

Consumers kept paying their membership fees of $50 or $100 during the economic crisis because of the value Costco offers.

"He's done an amazing job of keeping the company focused on their core values to create one of the strongest consumer franchises in the world," said Weller, the research analyst.

"Eighty-nine percent of its members renew every year, and if you figure some of them move away and die, that suggests a very powerful commitment," he said.

The rate for business members is higher: above 90 percent. "I think the technical term for that is astonishing," Weller said.

Costco does not press suppliers for impossibly low prices, he said, but Sinegal insists on integrity and honesty.

The chain famously pulled Coca-Cola from its shelves in 2009 after learning that it was not getting the soda manufacturer's lowest price. In a few weeks, the companies reached an agreement and Coke products were back. "They force a certain kind of honesty on certain suppliers and vendors," Weller said.

Seattle Times researcher David Turim contributed to this report.

Melissa Allison: 206-464-3312 or mallison@seattletimes.com

Information in this article, originally published Aug. 31, 2011 was corrected Sept. 1, 2011. A previous version of this story said Costco began in Kirkland. It was started in Seattle in 1983 and moved to Kirkland about five years later.

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