Costco: How the Student Bought Out the Teacher's Company

Part of Retailer Playbooks — history-first profiles of every company on the NRF Top 100 Retailers list.

Costco Wholesale ranks third on the National Retail Federation's Top 100 Retailers 2026 list, with $198.73 billion in 2025 U.S. retail sales, compiled with Kantar. Most retail histories are stories of one founder against the market. Costco's is stranger: it is the story of an apprentice who left his mentor's warehouse club to start a rival, and a decade later ended up absorbing the mentor's own company, erasing its name from the map.

The apprentice

In 1955, a teenager named Jim Sinegal took a job bagging groceries at FedMart in San Diego. The man who owned FedMart was Sol Price, a lawyer-turned-retailer who would later be credited as the father of the warehouse club format. Sinegal rose through FedMart to executive vice president of merchandising and operations, working directly under Price for years. He has said flatly that he learned the entire business from him, according to Wikipedia's account of Sinegal's career.

Price left FedMart in the 1970s and, on July 12, 1976, opened Price Club in San Diego, putting $2.5 million behind an entirely new idea: a members-only, no-frills warehouse where businesses bought in bulk at prices close to wholesale. It worked. By the early 1990s Price Club had grown to 94 locations across the U.S., Canada, and Mexico, and was pulling in $6.6 billion in annual revenue, according to Wikipedia's history of Price Club. Sinegal followed Price there too, absorbing the model from the inside.

Kirkland, 1983

Sinegal didn't stay. Along with Seattle retailer Jeffrey Brotman, whose family had been in retail for generations, he opened the first Costco warehouse in Seattle on September 15, 1983. It was, in effect, a direct competitor to the format his own mentor had invented, run by the person who understood that format best. The bet was that the warehouse club idea had room for more than one operator, and that discipline on cost structure mattered more than who invented the category.

Costco grew fast enough that by 1993, it and Price Club were rivals eyeing the same shrinking pool of real estate and members. That year the two merged into a single company, PriceCostco, combining 206 locations and $16 billion in sales, per Wikipedia's Costco history. The union did not go smoothly. Price and his family exited within a year over strategic disagreements, a chunk of the combined real estate was spun out as Price Enterprises, and the merged company spent years untangling two overlapping warehouse networks and two sets of loyal, opinionated members. It was not until February 1997 that the "Price" name was fully retired and the company became simply Costco Wholesale, more than two decades after Sol Price had first put his name on a warehouse door.

That is the detail worth sitting with: Costco did not just compete with the company that invented its category. It eventually bought that company, absorbed its stores, and buried its name. Most retail histories describe an underdog beating an incumbent. This one describes a student outgrowing a teacher inside the same industry the teacher created, then folding the teacher's company into his own.

What the merger left behind

What survived the merger, and outlasted both founders' direct involvement, was the discipline neither man ever loosened. Costco caps markups at 14% on regular merchandise and 15% on its own Kirkland Signature private label, a rule the company has held to for decades even when it left margin on the table competitors would have taken, per the same Costco history on Wikipedia. The company also keeps its assortment narrow on purpose, running roughly 3,700 active SKUs at a time rather than the tens of thousands a typical big-box store carries. Fewer choices, bought in bigger volume, at a thinner margin: that is the entire Price/Sinegal thesis, still running unmodified forty years later.

The membership fee is the other load-bearing piece. It now generates more than 65% of Costco's net operating income, which means the merchandise business barely needs to turn a profit on its own. That structural fact is why the $1.50 hot dog-and-soda combo, introduced in 1985, has never moved in price. It is not a marketing gimmick so much as proof to members that the low-markup promise is real, funded by a fee model that does not depend on food-court margin to work.

The private label that outgrew the founders' plans

Kirkland Signature launched in 1995, named for the Washington city where Costco was then headquartered, as a modest store brand. It is no longer modest. Kirkland Signature now accounts for close to a third of total company sales and generated roughly $86 billion in revenue in a recent year on its own, per Wikipedia's summary of Costco's operations. Few retailers anywhere have built a private label that functions less like a house brand and more like a second, larger retailer operating inside the first one.

Sinegal ran Costco as CEO until 2011, telling reporters at the time that he cared less about quarterly Wall Street reaction than about "building a company that will still be here 50 and 60 years from now." Under Craig Jelinek and now Ron Vachris, the company has kept growing along the same lines Sinegal and, before him, Sol Price laid down: pay employees well, keep turnover low, keep the assortment tight, keep the markup capped, and let the membership fee carry the business. Costco now runs 924 warehouses worldwide with roughly 341,000 employees.

The unique thread through all of it is not the low prices or the bulk paper towels. It is that Costco's founding was an act of direct competition with its own founder's teacher, and its defining corporate milestone was buying that teacher's company and quietly retiring its name. Most retailers write their history as a fight against outsiders. Costco's is a fight it won against the very person who taught it how to fight.

Behind the hot dog price and the pallet stacks sits the same unglamorous machinery that runs every retailer on this list: a supply chain, a product catalog, and the discipline to keep both honest at scale.