Billionaire Charles Munger, a director at Costco, has likened the company’s focus on expenses to a pious obligation and said the retailer does more to advance society than some large philanthropies.
His ties with Costco were no help Thursday to American Express, the credit-card lender that’s one of the largest holdings of Warren Buffett’s Berkshire Hathaway, where Munger is vice chairman. AmEx said its relationship with Issaquah, Washington-based Costco in the US will end next year.
The credit-card lender tumbled 6.7 per cent as of 3:10 p.m. in New York, the most in more than three years. That contributed to a loss of more than $850 million in market value for Berkshire’s stock portfolio. Munger, 91, has been on the Costco board since the 1990s. Susan Decker, a former executive at Yahoo!, is also on the boards of both Costco and Omaha, Nebraska-based Berkshire.
AmEx Chief Executive Officer Kenneth I. Chenault said on a conference call that ending the 16-year partnership with Costco was in his company’s long-term interests. Buffett has said previously that he admired the CEO for his management ability.
Coke, Pepsi
“We were not able to agree on terms that made economic sense for us and our shareholders,” said Chenault. “We will invest in other opportunities that we think can generate greater returns over time.”
Bob Nelson, a spokesman for Costco, said in a phone interview that the retailer is “all about saving money” to give customers more value. A few years ago, the company switched from serving Coca-Cola products at its store food courts after getting a lower bid from PepsiCo. Berkshire is the largest shareholder in Coca-Cola.
“At the end of the day, it’s all about saving money for our members and widening the gap between us and our competitors,” Nelson said. “If that means Pepsi over Coke, that’s what we’re going to do. If it means a different credit-card provider that’s going to be a better offering for our members, we’re going to try to do that.”
Bloomberg News, edited by ESM
