Costco faces major headwinds with a possible strike and DEI vote

A fraction of Costco employees are threatening to strike amid stalled union negotiations. Meanwhile, online conversations are swirling about the company’s efforts to maintain its diversity, equity and inclusion practices.
But some experts say the company is unlikely to see much — if any — customer fallout.
Around 18,000 Costco workers are unionized with the Teamsters out of around 333,000 employees worldwide. Their contract expires on January 31. Union organizers say the company has both failed to come to the table for recent negotiation sessions and, more broadly, isn’t meeting their proposals for raises that mirror the success of the company. Around 85% of the unionized workforce voted to authorize a strike if a new contract isn’t reached.
This is all happening amid an unfolding shareholder battle over diversity and inclusion practices that came to a head this week. On Thursday afternoon, some Teamsters rallied in support of the workers outside the company’s Issaquah, Washington headquarters, in front of a much-watched shareholder meeting. At this meeting, a proposal to push the company to audit its DEI practices was overwhelmingly voted down.
Put together, Costco has battles on multiple fronts that could, on their own, be enough to steamroll a brand’s growth. Still, the company is looking to uphold its reputation by keeping a low profile and keeping comments to official channels like SEC filings.
A brewing union fight
Chris Reed, a shop steward at a Baltimore-area Costco who has worked for the company for over 30 years, said the Teamsters’ proposals are the result of surveys from union members. He said higher wages and more retirement benefits are at the top of the list, as are improved communication channels for managers and employees. Ultimately, he said, workers want to share the company’s success.
The company’s stock price is trending toward $1,000 a share as it continues to post increasing sales numbers. The company’s December sales reported an increase of nearly 10% in sales over December 2023. Meanwhile, its fiscal year 2024 earnings showed a net sales increase of over 5.9% worldwide and total revenue of $254 billion. The retailer reported net income of $7.367 billion, up from $6.292 billion the prior. Some of the companies’ growth is being propelled by its online presence, with 16.2% growth in e-commerce year over year.
“The pandemic created a super profitable company, more than doubled their profits,” he said. “Meanwhile, the wages that were offered [in] the contract immediately at the end or near end of the pandemic didn’t really meet the new reality of inflation and the reality of cost of living.”
Reed said the workers had to take the strike vote to show how serious they are about their demands. Fleet drivers previously reached an agreement with Costco under their own contract following a strike threat. This time, Reed said talks with management haven’t yielded progress, and the company has continued to send a message that it’s not taking their proposals seriously.
“We’re not going to be told what we’re worth, but we’re going to discuss and tell you what we’re worth. We expect to receive a contract that reflects the company’s profitability and the work we do and have done to help get them there,” Reed said.
A DEI debate
Costco has also recently been at the center of the debate on the role of diversity, equity and inclusion practices in companies.
The National Center for Public Policy Research, a right-leaning think tank, submitted a proposal late last year to Costco’s shareholders to audit the business risks associated with its DEI practices, according to the Associated Press. Supporters say DEI practices prevent people from competing on their own merits and pose legal, financial or repetitional risks to a company.
However, Costco’s board of directors asked its shareholders to reject the motion at its annual meeting. “We believe that the proponent’s request for a study reflects a policy bias with which we disagree and that further study and reporting would not be an efficient use of Company resources,” it said in an SEC filing in mid-December.
During Thursday’s vote, the proposal was voted down by 98% of shareholders.
Costco did not immediately return a request for comment from Modern Retail.
The potential impacts
Some onlookers say the company is well-prepared to weather these storms based on how much brand equity it’s already built.
According to its most recent earnings, the company has reported a more than 92% retention rate among its members in the U.S. and Canada. It’s famously kept its hot dog prices at $1.50 since the 1980s. Last year, membership prices increased by $5 and $10 for the first time since 2017.
Scott Benedict, founder and CEO of the retail consultancy Benedict Enterprises, said Costco is unique in seeking to uphold its diversity, equity and inclusion policies even as other companies are surrendering them. “It’s a testament to the fact that the Costco brand equity and member loyalty and loyalty from the investment community is pretty high,” he said. “They have a lot of support across a lot of stakeholders in this business that afford them opportunities to stand firm on some things that other companies may not have.”
Similarly, he wasn’t surprised that the company was playing hardball with union negotiations, given his experience when competing against Costco as a director in member services at Sam’s Club. “I can recall more than one occasion where they stopped doing business with some pretty major consumer brands, Apple being one, Coca-Cola was another, because negotiations broke down on the terms of their agreement,” he said. “They were willing to let shelves go bare for times for those popular products to prove a point, and that’s an indicator that Costco’s folks are very tough negotiators.”
According to Mark Cohen, professor and director of retail studies at Columbia Business School, it’s no surprise that workers negotiating a contract would want a bigger piece of the company’s success. “That’s what unions do,” said Cohen said. He added, however, that the union is playing “Russian roulette” with a strike authorization. Given that just 5% of the company’s warehouse and distribution workers are unionized, the company can likely afford to let them walk out. “If the Teamsters represented 300,000 workers, a contract renewal would’ve been successfully negotiated and signed with no notoriety whatsoever,” he said.
Whether a deal is reached or if workers strike, Cohen said Costco is unlikely to get any blowback from the negotiations.
“Costco is arguably one of the most successful retailers in the world, maybe the most,” he said. “They just keep smacking the ball into the far corner of the field. They don’t do silly, stupid things. They have an underlying point of view on pricing value, inventory, and e-commerce, and they just stick with it.”