Washington State Behemoth Taking Fire From Multiple Sides

After a pretty smooth run over the last quarter century, the global retail giant Costco is facing its share of adversity—and then some.

While small businesses and smaller chains were closing shop for good during the pandemic, Costco saw massive profits. They added roughly 10 million new members during COVID while membership renewals were up over 90%.

Costco Has Been Experiencing Lots of Growth

Costco has been such a juggernaut that I couldn't find data on the last time they took a financial loss, but they are adding a second warehouse in the Tri-Cities (expected to open sometime this year), and they show zero signs of slowing down.

Recently, Costco has been in the news, and the reasons why are certainly topics for conversation. The grocery retailer has always positioned itself as being a 'pro-worker' company. They've developed a reputation for paying good wages, providing good benefits, and giving their employees the ability to advance.

Case in point: I know someone personally who started working the deli at the Kennewick Costco; now he's managing his own Costco store in Colorado.

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The Teamsters Union Is Targeting Costco

Roughly 18,000 of the company's 210,000 (give or take 1,000) nationwide employees are represented by the Teamsters union. Teamster boss Sean O'Brien believes Costco needs to show more love to their workers. Last week, employees rallied outside the headquarters in Washington State to show their both displeasure and their unity.

O'Brien said in a statement:

Costco has two choices: respect the workers who made them a success or face a national strike. Costco Teamsters deserve an industry-leading contract that reflects the company’s massive profits. If Costco thinks they can exploit our members while raking in billions, we’ll shut them down

Costco truck drivers in Washington State recently unionized. The 150 haulers are part of the group that could go on strike. It would impact food and fuel delivery to all Costcos in the state if they hit the picket line.

If you thought the great toilet paper shortage of 2020 was inconvenient, imagine what this potential supply line disruption could do. If an agreement isn't reached by Friday (Jan. 31), they've threatened to walk.

The Teamsters Aren't the Only Group After The Company

There was a time when businesses just did business and avoided taking stances on controversial issues. Michael Jordan famously said, "Republicans buy sneakers, too," when asked in regard to his political position. Public pressure has a funny way of changing things.

As social issues began to take a larger role in our discourse, many activist groups started calling out companies by name and demanding to know where they stood on an issue. Many times, a boycott was threatened if the company didn't respond in a way said group wanted.  Those boycotts became a weapon, and companies began to buckle under the pressure, but not always to their benefit.

One of the more famous examples of this was the debacle surrounding Bud Light. Many times a company can withstand the negative barrage and then get back to business as usual. In Bud Light's case, it hasn't gotten back to business as usual. The company said sales began to stabilize toward the end of last year after losing money for nearly 18 months.

Others say Bud Light will never regain what they lost. What separates Bud Light from what Costco is facing is that they didn't have nineteen state attorneys general breathing down their necks.

Costco Facing Issues Over Their DEI Stance

DEI (diversity, equity, and inclusion) policies and practices has been on the rise since 2019. There wasn't an industry that wasn't instilling some form of the practice. Backlash began to grow in the last year as DEI began to be viewed negatively, and boycotts against companies with DEI practices increased.

While companies like John Deere, Walmart, Meta, Amazon, and McDonald's began to publicly distance themselves from DEI, Costco took a different tone.

An investor proposed an end to DEI efforts within the company at a recent shareholder's meeting. The shareholders overwhelmingly rejected the proposal, with Costco affirming it's commitment to DEI practices.

This caught the attention of 19 attorneys general from around the country who sent a letter to Costco. They suggested that Costco rethink their company's position, as they described DEI as a discriminatory practice.

On his first day back in the White House, President Trump signed an executive order targeting DEI programs within the government along with any federal funding associated with DEI. Those attorneys general are citing this executive order even though it does not pertain to the private sector. Iowa's top lawyer has gone so far as to say she will "look at all available options" if Costco continues down it's current path.

If any company is built to withstand the barrage, it's Costco. However, if their bottom line sees a reduction, whether from supply impacts from the impending strike or anti-DEI members cancelling their Costco memberships and switching to Sam's Club, their stances on both issues could change.