From cubicle to corporate icon, Costco finance chief ends 40-year run

Richard Galanti, who served as chief financial officer of Costco for nearly 40 years.  (Costco)
Richard Galanti, who served as chief financial officer of Costco for nearly 40 years. (Costco)

Summary

Richard Galanti has stepped down as CFO after nearly four decades in the role. The longtime executive has left his mark on the retail behemoth.

On a recent overcast Wednesday, Richard Galanti was at his cubicle by 8 a.m., as usual.

What was unusual: It was his first week not being Costco Wholesale’s finance chief, a job he held for nearly four decades as the longest-serving CFO of a major U.S. public company.

The 68-year-old former finance chief influenced how Costco appealed to shoppers. Its members will find hardly any frills in the retailer’s warehouses and significantly fewer items—just 3,800 unique products—on the shelves compared with other large stores. Yet shoppers flock to Costco for everything from its popular Kirkland Signature shirts to diamond rings, the viral chocolate-peanut butter pie and occasionally gold bars.

During a recent visit in March to the wholesale retailer’s Issaquah, Wash., headquarters, Galanti, dressed in his standard Kirkland Signature dress shirt with a navy blue sweater and navy slacks, spoke of how the company’s uncomplicated model keeps customers coming back for more. The retail giant maintains a limited range of products but ensures they are of good quality, sometimes eclectic, and reasonably priced.

“We keep things simple," Galanti said, referring to the company’s core tenets.

This philosophy permeates the company, from its workspaces to product selection, and is part of the secret behind Costco’s roughly 10% growth for 30 successive years. The retailer’s own brand, Kirkland Signature, alone does more than $50 billion in revenue annually, just shy of what global brands such as Nike brought in in the latest fiscal year.

Galanti was named CFO of Costco at 28, nearly two decades below the average hiring age for finance chiefs among S&P 500 and Fortune 500 companies, according to executive-search firm Crist Kolder Associates. His time in the role—39 years—is the longest of any CFO in the group, handily beating the average of 4.7 years.

Galanti, who stepped down as finance chief last month, became the “voice" of the company in those years. He led nearly all of Costco’s earnings calls solo since the company went public in late 1985, with the exception of one in May 2022 because of a family event, a departure from the more typical CEO-CFO tag team.

On those calls, Galanti is mostly business with jokes sprinkled in, breezing through Costco’s financials and analyst questions. On a December earnings call, for example, when asked to weigh in on the then-recently announced chief executive change—Ron Vachris stepped into the role in January—Galanti quipped: “I’m up for review, so I’m going to say nice things" before briefly discussing the “seamless transition."

All of this is handled from a spacious but open cubicle that overlooks the company’s campus. His desk is stacked with piles of papers and files, several family photos sit off to one side, a blue baseball cap rests near calendars pinned to the cubicle wall next to a coffee cup filled with pens.

Right place, right time

Galanti, who has a degree in finance from the University of Pennsylvania’s Wharton School and an M.B.A. from Stanford, worked with Costco’s founders on a financing round as an investment banker with Donaldson, Lufkin & Jenrette.

“It was a fortuitous set of events," Galanti said. Costco’s then-CFO was leaving, and Costco co-founders Jim Sinegal and Jeff Brotman offered Galanti the job of vice president of finance in 1984. He became finance chief 10 months later.

It didn’t hurt, and maybe was key, that Galanti grew up working at one of the four grocery and liquor stores that his dad and three uncles owned in the greater Atlanta area, doing everything from bagging groceries to stocking shelves, mopping floors and cutting meat. It wasn’t the M.B.A. that mattered to Costco’s co-founders as much as his knowledge of the industry, Galanti joked. Sinegal couldn’t be reached for comment about working with Galanti. Brotman died in 2017.

“They liked me because I knew shrink wasn’t a doctor; it was inventory shortage," he said.

Galanti started leading earnings calls fairly quickly after joining Costco. The company’s co-founders were likely on early calls, which Galanti said he probably scripted. “But at the end of the day, I think in relatively short order, I’d be the one on the call," he said, adding that it happened organically.

He recalls in the early days as CFO writing the guts of a quarterly filing from home on a Sunday, sometimes in his bathrobe, and then having someone in accounting check the numbers on the Monday before results went out. Now, there’s an audit committee meeting, a CEO certification meeting and a disclosure controls committee meeting—“It’s not all bad, just more to do," Galanti said.

Other changes include automation of buyer and supplier activities rather than having them manually processed and paid and the vast new headquarters that replaced the three small buildings that for decades housed all of the Costco employees who work at the Washington campus.

In other ways, though, the company has stayed the same. Executives don’t promote themselves or their achievements on social media. Galanti’s title is listed as “VP" on LinkedIn, which he joined in 2011 and doesn’t recall ever updating, while former CEO Craig Jelinek’s profile still reads “C.O.O.," referring to the chief operating officer role he held from 2010 to January 2012. Jelinek didn’t respond to requests for comment.

The open office plan persists and parking spaces are reserved for employees based on tenure not titles. Galanti has one, but the new CFO, Gary Millerchip, has an unreserved spot across the street.

“We just grew up that way," Galanti said. “We’re a little quirky, but that’s our culture and it works for us."

Managing inventory

While Galanti avoids boasting about his influence at Costco, the executive takes pride in the company’s efforts to keep inventory simple and prices low. A more typical supermarket or discount supercenter may have between 50,000 and 100,000 items, versus Costco’s 3,800.

This works for Costco’s bottom line. The retailer also pursues other ways to keep its costs low.

There is greatly reduced expense and little art in stocking the store once inventory reaches a Costco warehouse. “Think about, at a store where every can has to be put there and made to look pretty, whereas we have a forklift operator putting 2,000 cans for sale with a pallet and ripping off the plastic," Galanti said.

Costco also isn’t shy about flexing its size to secure better prices as “our buying power per item dwarfs anybody out there," he said.

The company has an internal cap on the markups it will take on a product—15% for Kirkland Signature products and 14% for any others. Supermarkets tend to work on a mid- to high-20% markup, analysts said.

It is a lesson learned from Costco’s founders. Back in the 1990s, when women’s Calvin Klein jeans sold at most retailers for around $55, Costco would occasionally get the jeans for $27.50 a pair and sell them to members for roughly $29 or $30, Galanti said. Then Costco got its hands on a larger shipment of the jeans, at around $22 a pair.

“We could have sold them for $28.99, $29.99 all day long. We sold them for like $22.99," Galanti said. “We left $10 million of gross margin on the table when we were a much smaller company."

The company makes that same trade-off today, Galanti said. “It keeps us honest," he said of the company’s self-imposed cap on markups. “For every dollar we can save, we want to give at least 80 or 90 cents back to the customer and nobody will catch us from a competitive standpoint."

Boards, bikes and travel

What’s next for Galanti is a popular topic of conversation among friends, family and colleagues.

Hundreds of people called, texted or emailed in the days after the news of his stepping down, some even gauging his interest in pursuing other opportunities.

His family wonders too. Galanti’s oldest son was in the office just after the announcement in February and a colleague asked if the family was excited about the news. “He said, ‘Frankly, we’re a little concerned, what the hell is he going to do?’" Galanti said with a laugh. “But we’ll figure it out."

Galanti said he would likely join one or two boards to start with. But before that, the executive is looking forward to traveling, and perhaps will take another African safari or travel to Italy with family, as they did a couple of years ago when he missed the earnings call. He enjoys bike riding and golf, though he is “not a four-day-a-week golfer."

Costco business is also on the agenda for the near term. Galanti will continue making the 16-minute commute into the office for now, while he is on the board through January. He plans to be at a few store openings and help Millerchip, the new CFO, a former Kroger finance chief.

“I told him even before he started, I’m sure my goal and his goal is for me to be in your hair or out of your hair as much as you want me to," Galanti said of Millerchip.

Analysts wonder what will change with Millerchip, who stepped in to lead Costco’s finances last month.

Galanti has been “so part of the fabric of that place," said Peter Benedict, a managing director and senior research analyst at Baird, who has been covering the retailer for about two decades. “His perspective and the depth of understanding that he has of the company’s business and its culture, it’s unparalleled."

Over the years, Galanti has handled everything from accounting and investor relations to human resources, risk management and benefits in the early years, CEO Vachris said in an internal memo when Galanti’s retirement was announced. His business sense, Vachris continued, has been complemented by “complete approachability" and “friendliness."

The business is in good hands, Galanti said, midway through the first week of not being a CFO.

“People ask me, how did I know [Costco] was going to be successful, how did I get to be CFO?" he said. “And I say, ‘I worked my ass off, which created chances for good luck.’"

Write to Jennifer Williams at jennifer.williams@wsj.com

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