After serving as the voice of Costco at its quarterly earnings calls since 1985, the mic drops in triumph for someone considered to be one of the best finance chiefs ever.
Editor’s note: Since the turn of the millennium, when Russ Banham first interviewed Costco’s veteran CFO Richard Galanti in person, he has been his go-to finance chief. In economic tailwinds and headwinds, from the emergence of e-commerce through a global financial crisis, a once-in-a-century pandemic, the unraveling of the supply chain and other profound challenges, when Banham called—a 24-year cycle of 19 interviews—Galanti answered, and readers were better off for it.
Earlier this month, Banham called Galanti again following the announcement of his retirement in January 2025, capping a nearly 40-year stint as CFO that began in January 1985—the only finance leader the public company has had. When Galanti became CFO, Costco tallied 17 membership-only warehouse stores in a few Western states. At present, there are 875 such stores throughout the U.S. and in 13 countries, earning the number 11 spot in the Fortune 500. Forty years ago, he was one of 1,950 employees; today, more than 316,000 part-time and full-time employees make up Costco’s talent worldwide. Revenue has rocketed from $101 million in fiscal 1984 to $242.3 billion in 2023. Nearly 130 million people are Costco members.
Galanti began his career at the giant retailer in August 1983 when he was part of a three-person team of investment bankers at Donaldson Lufkin & Jenrette (DLJ) assigned to help a little-known startup in Seattle raise equity capital in a Series A funding round. The startup was Costco, whose founders Jeff Brotman and Jim Sinegal had previously raised $7.5 million in capital from friends and family to build the first three membership warehouse stores in Seattle, Portland and Spokane.
Over a six-month period, Galanti helped raise $16.9 million in funding to grow the business. In March 1984, the founders inquired about his interest in moving from New York to Seattle to become VP of finance. He took the leap. Ten months later, he was named CFO. In March 2024, he will pass the baton to Gary Millerchip, former CFO at Kroger, remaining in an advisory capacity through the end of the year.
The following Q&A has been edited for clarity and concision.
Looking back at your career as the finance chief at a startup that grew like gangbusters across the U.S. and throughout the world, beginning in an era when there were no internet search engines, no smart phones, Zoom calls or even Excel spreadsheets, and concluding at a time when AI is expected to play an outsize role in all business processes, what sticks out as the big changes in the role of the CFO?
As the CFO of a public company, I always joke about all the new acronyms, from FD to SOX to CCPA to ESG. Over the years, we’ve had to monitor all types of increasing regulatory requirements and constantly evolving sales, property, excise and income tax regimes across the U.S. and the world. Part of the job of the CFO is making sure the company has the capital structure and resources in place to carry out the growth plans. Another part of the job is to provide a 40,000-foot view of how we’re looking, during the month and each quarter, to the CEO and other senior executives.
Certainly, advancements in technologies like automation make this responsibility more efficient and less time-consuming. Payables clerks used to manually match invoices with receipts and bills of lading, which can be a monotonous task. As a company that processes nearly 3 million invoices a month, automation has been incredible, freeing them from these labors to focus on more meaningful value-added work.
What were the keys to your success as a CFO and what can tomorrow’s finance chiefs learn from that to replicate?
Having the right people in the right seats gets you where you want to go. I remember Jim Sinegal saying at a national managers meeting when we had about 300 locations that if he could do every job in the company, he would. But he couldn’t, of course. Ultimately, it was up to the managers to develop the people under them to accommodate their organization’s functional needs, he said. That requires hiring good people, developing succession plans, and constantly promoting the culture of the company to encourage new people to join the ranks. For us, culture is something you set at the top of the organization, and then you do your best to ensure it permeates throughout the company.
You worked in your father’s grocery store as a kid sweeping the floor and stocking the shelves.
My dad Sam and his three brothers owned four little retail stores in and around Atlanta, Georgia, where I grew up. Two were called Food Town and the other two Benny’s and BIM’S, named for the four brothers—Benny, Isaac, Morris and Sam. Their father emigrated from Turkey and Greece to Atlanta around 1916. My dad was the youngest, by 15 years, and he did local deliveries on his bicycle. Beginning when I was 10, I bagged groceries, cut meat, mopped floors and stocked the shelves, continuing through much of my teen years. On Saturdays, summers and holidays when my friends were goofing off, I was at the store. In college, I helped manage one of the stores during the summers.
Did you think that you might someday run and grow the family business?
Not really, as there were four brothers. Together with their sister, they had many kids who also worked at the stores doing many of the same things I did. When I graduated college, my summer work at the stores came to an end. I hired on at DLJ for two and one-half years, before heading to Stanford for my MBA. Then, I returned to DLJ.
Take us back to 1983 when DLJ dispatched you to Seattle to handle the $16.9 million mezzanine financing for Costco.
I was on a team led by Hamilton “Tony” James, a senior DLJ officer, handling the Series A funding round. I had been asked by Steve Lebow, a DLJ vice president, to work with him on the financing. I was the grunt and did the analyses and original document writeups and attended investor meetings. At the close of the round, Jim and Jeff, Costco’s founders, mentioned that the CFO was leaving and asked if I’d be interested in coming to Seattle as the VP of finance for several months before I became CFO.
Any reservations about taking the job?
I remember sending my dad the Series A offering document and mentioning that Costco had offered me a job and I was seriously thinking about taking it. He said, “Son, I’ll support you in anything you want to do, but there’s no way this startup is going to make money on 10 percent margins.” I made the jump, never knowing that Costco would be successful or how long I’d be here.
Let’s go back in time to Costco’s IPO in December 1985. The initial price per share then was $10, adjusting for three stock splits thereafter. This morning, the stock was trading around $740 per share. How important was the timing of the IPO and what was your involvement?
As CFO, I was very involved in helping prepare the IPO. It went relatively smoothly. We were one of the first specialty retailers to go public. Home Depot did it before us in 1981 and others like Staples, Starbucks and Office Depot followed. Specialty retail was hot. As for the timing, well, we had nine warehouse stores in five states in 1984. Three years after the IPO, we’d opened another 30 or so locations. Also, there were nine warehouse club competitors in 1985, including Price Club. Wal-Mart opened Sam’s Club in 1983, Pace Membership Warehouse opened around the same time. There was Zayre in Boston and they then opened BJ’s Wholesale Club, which had a smaller format. Today, there are three of us left.
Looking at the articles I wrote featuring your comments over the past 24 years, we covered a wide array of topics. Do you recall the earnings call where an analyst asked you about Amazon’s encroaching presence in the product categories Costco sold?
I do, but remind me since I’ve done so many earnings calls, I’ve lost count.
Well, you surprised them by citing several annual surveys indicating that more and more Costco members were becoming Amazon Prime members, and then you added, “including my family.” Your point was that the two memberships are not mutually exclusive. Like many of your responses to analyst questions, you were straightforward and transparent, making them laugh and setting them at ease. As you told me, “We’re steady as she goes in all seasons [and are] in the enviable position of generating more cash to spend on growing the business and trying new things.”
That was true then and remains true. We’re constantly trying new things, evolving the concept. The original Costco, for instance, had no fresh foods, very little in refrigerated foods, no pharmacy, food courts, gas stations, high-end jewelry or large products like mattresses and appliances.
I remember when the idea for the pharmacy came up. A fellow named Charlie Burnett had a couple pharmacies at FedMart that were sold. He and another pharmacist opened some retail pharmacies in San Diego. Charlie then called Jim Sinegal and asked if he’d ever thought about putting a pharmacy in our locations. Jim liked the idea, and Charlie and the other fellow moved up here and launched the first one. We’re always trying new stuff. Recently, we decided to sell one-ounce gold bars for around $2,000 each. In a single quarter, we sold over $100 million worth.
Another article I interviewed you for looked at the impact of the 2007-2008 financial crisis. You echoed a quote attributed to Jim Sinegal—”We deal with adversity head on.” I recently watched some videos of Jim in the 1990s discussing Costco’s Code of Ethics, five key points comprising the company’s pledge to obey the law, take care of customers, take care of employees, respect suppliers and reward shareholders. What mattered most to the company, he said, was letting people know they were valued, and their voice was heard.
Jim and Jeff wrote those five points on how to operate the business back in 1983, and we’ve lived by them for more than 40 years. They were ahead of their time. I remember telling Jim years ago that it’s nice to work at a successful company where your customers and employees actually like you and trust you.
This was reinforced on February 6, when the press release went out to employees that I was retiring. Over the next few days, I received a couple hundred emails and texts thanking me. A clerk working at one of our locations on the east coast, for instance, thanked me for giving her family a better life, great benefits, healthcare and a good wage. She told me she actually listened to and enjoyed the earnings calls, which was really something.
She’s not alone in that. As The Wall Street Journal reported after the press release went out, several analysts stated that you were the “primary voice” of Costco, the “face of the company.” One analyst said you were “crucial to the company’s growth,” pointing to steady sales in recent years as other retailers struggled. It’s “all part of what makes Costco the great company it is today,” he said. That must feel pretty good—employees, customers and even the company’s analysts saying positive things. When January 2025 rings in, will you miss the limelight?
I’ll miss the people—our employees and the customers, our members, who stick with us through thick and thin. They know we’re there for them, always. That won’t change. During the worst inflation of the last few years, we kept membership fees the same, mitigated raising prices as best we could, and were often the last to raise prices. I provided input into these decisions, but our success really rests with our customers’ loyalty and, of course, our merchants, operators and the other great Costco employees that support our business.
They deserve the kudos. But aside from the people, I’ll miss getting up every morning and thinking about what to do to remain in the game. And I’ll miss the quarterly calls. I’ve done that for a long time and have been fortunate to always have a great story to tell. When I tell the Costco story to Wall Street and other groups like employees and students, I get inspired myself. I know they do, too.
Have you thought much about what you’ll do with your time after you hang up your hat?
Funny story. Not long ago, my oldest son Sam, who’s named for my father, came to visit me in my cubicle and we decided to grab lunch in the commissary. One of my colleagues knows my son and said, “How do you and your family feel about your dad retiring?” “Frankly, we’re a little concerned,” Sam replied. “He’s done this his whole life. What the hell will he do?”
What will you do?
I think about that a lot. Some of the emails I received after the retirement announcement came out were from former C-level people I know at different companies. One said the first order of business is “to do something to stay busy, a little busy,” he underscored. “Don’t retire on a Friday and commit to five things on Monday, do just one or two things.” So, that’s my plan. I’ll join a board or two, travel a bit more with family and friends, visit our kids in New York, LA and Seattle, and probably continue to speak to students at a variety of schools and universities.
Berkshire Hathaway’s Charlie Munger—who died in 2023—had served on Costco’s board since 1997, knew the business inside-out and was an ardent fan of the company. “I never think about selling a share of Costco just because it’s selling at a high price,” Charlie said, providing his reasons—the value of Costco’s trusted products, low prices, huge purchasing power and moral ethos. “It’s going to be a big powerful company as long as you can see,” he said. “I wish everything else in America was working as well as Costco does.”
I was very fortunate to get to know Charlie, having joined the board in 1995, a couple years before he joined. His comment about our moral ethos is something that began with Jim and Jeff. They’d often visit Costco’s throughout the world just to see and talk with customers and employees.
Jeff passed away in 2017 but Jim is still going strong at 88. He used to say that we deliberately created a “treasure hunt” experience for customers when they went to a Costco. New items came in all the time. Quality items, not cheap merchandise. We pre-selected the best in every single category. This culture of a positive experience extends to our employees. We strive to know each other on a first-name basis. We manage in a collaborative way and not by intimidation. Senior management talks with hourly workers in hallways about last week’s ballgame. We try to project a safe space where they are comfortable being themselves, saying what they will and having fun.
Any parting comments to Costco’s future employees?
I’ll miss this place. I tell college students thinking about their careers that when they get a job interview, they should try to show up 20 minutes early to visit the lunchroom. If most everyone has a smile on their face, it tells you they love what they do. I do. All these years, and I still love my job.
Russ Banham is a Pulitzer-nominated business journalist and best-selling author.