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Costco Wholesale Corporation
Founded 1983 · Issaquah, WA · 897 warehouses · 14 countries · ~320,000 employees
Business Summary
Costco operates 897 warehouses across 14 countries, generating $254.5B in FY24 revenue through a membership-based wholesale model. The company's competitive moat is built on three pillars: scale-driven purchasing power that enables industry-leading pricing, a curated 4,000-SKU assortment (vs. 30,000+ at traditional grocers) that drives inventory velocity, and membership fees that contribute nearly all operating profit while locking in customer loyalty at a 93% renewal rate.
The business is organized into two reportable segments: Merchandise (93% of net sales, subdivided into Food & Sundries, Hardlines, Fresh, and Ancillary) and Membership Fees (2% of revenue but ~70% of operating income). Warehouse club operations span the US (615 locations), Canada (109), and International (173). E-commerce represents approximately 6% of total sales.
Segment Revenue Breakdown
| Segment | FY23 | FY24 | YoY Growth | % of Net Sales |
|---|---|---|---|---|
| Food & Sundries | $96.8B | $101.8B | +5.1% | 45.8% |
| Hardlines | $41.6B | $43.7B | +5.0% | 19.7% |
| Fresh | $36.1B | $38.6B | +6.8% | 17.3% |
| Ancillary / Other | $21.9B | $23.1B | +5.6% | 10.4% |
| E-Commerce | $14.2B | $15.3B | +7.7% | 6.9% |
| Total Net Sales | $210.7B | $222.5B | +5.6% | 100% |
Key KPIs
Reports & Analysis
Source Materials
Membership Economics at Scale: A Durable Compounder
Prepared by JD · April 2026 · Confidential
Costco's membership model creates a self-reinforcing flywheel: scale drives lower prices, lower prices drive member loyalty, and loyalty funds operating margins through membership fees
We believe Costco represents one of the highest-quality business models in global retail. The membership fee structure effectively pre-collects operating profit from a captive customer base with a 93% renewal rate, insulating the company from competitive pressure and allowing it to run merchandise at near-breakeven margins. The September 2024 fee increase — the first since 2017 — creates a multi-year tailwind to earnings that is not yet fully appreciated by consensus estimates. [1]
Three structural advantages compound over time
What the market is missing
The consensus view treats Costco as a fully-valued staple with limited upside. We see three underappreciated dynamics: first, the fee increase's impact on executive tier conversion rates is lagging and will accelerate through FY26. Second, e-commerce margins are structurally higher than in-warehouse due to reduced shrink and optimized last-mile economics. Third, international expansion — particularly in Asia — represents a $20B+ revenue opportunity with minimal incremental SG&A. [2] [3]
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