A couple of years ago we changed from the traditional gallon jug of milk, which is a squat plastic bottle, to a taller one that doesn't have as much empty space at the top. By doing that we eliminated tens of thousands of pallets moved a year, and more than 500 truckloads of freight a year. All that was done in the name of sustainability, but it also creates savings that we can pass on to the customer.

Not many people have been CFO of the same company for 26 years. How has your job changed since you started out?
The functions I'm responsible for today are essentially the same ones I was responsible for on the very first day. I started with 24 people reporting to me — 12 in accounting, 11 in what was then called data processing, and one analyst. I took over HR in 1993, when Costco merged with Price Co. Today there are about 1,400 employees covering those functions, as well as investor relations and a much more formal internal-audit function.

And your retail career goes back further than that.
I grew up in a family retail business — four small grocery stores operated by four brothers, one of whom was my dad. All of the cousins had instant Saturday, holiday, and summer jobs starting at about age 12. So I brought more than just a financial background to the table when I was hired at Costco.

Aside from scale, how did the family business compare with Costco?
The family business was a traditional retailer. You used loss leaders to bring people in, and then you saw how much you could mark up other goods to get to a certain margin level. That markup was significantly higher than the markup Costco uses today. We don't sell below cost, unless we've made a mistake on an item or are trying to get rid of it.

The mantra around here has always been, How can we improve the quality while lowering the price? If we can do that, we'll sell more, which will allow us to go back and get a better discount, which will lower the price again.

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