Costco's Cuernavaca site sparks protest
But at the end of the meeting, Costco's global growth was portrayed in a less favorable light. Several shareholders and activists protesting a Costco warehouse club under construction in Cuernavaca, Mexico, dominated the question-and-answer session, prompting executives to end the meeting.
While high-visibility retailers such as Starbucks, Nike and Wal-Mart routinely draw protests at their annual meetings, the rowdy scene that unfolded yesterday in front of hundreds of shareholders at the Meydenbauer Center was a first for Costco. After the meeting, Chief Executive Jim Sinegal said he'd never seen anything like it.
As Sinegal and Chairman Jeff Brotman fielded questions from shareholders, a small group of protesters, including a pair of Cuernavaca residents, carried in a green banner that said, "Costco — Don't destroy Cuernavaca."
As the protesters denounced Costco's plans for a store set to open in August, a number of shareholders told them to "sit down" and "go home."
Seattle resident Mary Jo Stansbury, who said she is a longtime Costco shareholder and a friend of Brotman's, brought up the issue. Stansbury said Brotman hadn't responded to her calls raising concerns about Costco's warehouse in Cuernavaca, a popular tourist center about 50 miles south of Mexico City.
"For some reason, you don't see the chaos and the pain that you're causing in another culture," Stansbury said.
Brotman said the company investigated the issue extensively and has become convinced that no response would change opponents' views.
The warehouse in Cuernavaca is going up on the site of a former hotel, the Casino de la Selva, as part of a retail complex that also will include a cultural center and a supermarket run by Costco's Mexican affiliate, Comercial Mexicana. Activists in Mexico have campaigned against the project for months, claiming that the company destroyed murals and hundreds of trees while demolishing the hotel and saying the shopping center will hurt local retailers.
In August, 28 protesters were arrested after blocking roads around the Cuernavaca site during a demonstration that was broken up by riot police. Opponents have asked the city to drop the retail project in favor of a park.
Sinegal said Costco was invited by government officials to bid on the Casino de la Selva site, which he said had been abandoned for years. The company has said it is paying to restore some of the murals, which will be displayed in the $2.5 million cultural center and museum to open this fall.
In addition to the restored murals, the museum will be home to the Gelman Collection of Modern Mexican Art, which includes works by Frida Kahlo and Diego Rivera and recently completed a run at the Seattle Art Museum.
"We think that we have not only obeyed the law ... we have been sensitive to the culture of Mexico," Sinegal said.
Jaime Gonzalez, senior vice president of Costco de Mexico, said the company will replant the majority of the trees removed for construction and that it has had the proper permits for every phase of the project. Sinegal said the company has donated 30,000 more trees to Cuernavaca.
In other business, shareholders re-elected Brotman, Sinegal and Chief Financial Officer Richard Galanti as directors and approved KPMG as the auditing firm.
The Issaquah-based retailer — which now has 412 stores around the world, including 21 in Mexico — tallied $38 billion in sales and $700 million in profits in fiscal 2002, which ended in September.
Sinegal said the company performed better than its two main competitors, Sam's Club and BJ's, over the holidays but is seeing higher bank fees and costs for health benefits and worker's compensation and faces higher expenses for entering new markets.
The company will start recording employee stock options as expenses this year, Sinegal said, a move shareholders applauded.
Jake Batsell: 206-464-2718 or jbatsell@seattletimes.com