Costco

COSTDiscount Retail

206

Mentions

Podcasts

Episodes

Podcast consensus

Points of consensus

▶Costco's business model is overwhelmingly driven by membership fees, which constitute nearly all of its net income, allowing the company to sell products at very low margins.May 2026

▶The company is executing a clear and aggressive global expansion strategy, with plans to open 28 net new warehouses in fiscal year 2026 and target over 30 annually in subsequent years.

▶Costco demonstrates exceptional operational efficiency, characterized by a limited SKU count (~4,000) and rapid inventory turnover (average of 27 days), which enables it to operate with negative working capital.

▶The company is experiencing robust financial growth, with Q2 FY2026 results showing a 9.1% increase in net sales, a 14% increase in net income, and over 22% growth in digitally enabled sales.May 2026

Points of debate

▶There are conflicting reports on Costco's sales per square foot, with one source citing $1,800 and another citing $1,200, which is lower than Trader Joe's.May 2026

▶Costco's high valuation is a point of contention; some analysts note it trades at a multiple twice as high as Amazon and has a P/E in the 50s, prompting some investment firms to sell their positions, while others see it as justified by performance.May 2026

▶While overall membership renewal rates are high (89.7% worldwide), the U.S. and Canada rate saw a slight decline, attributed to lower renewal rates from younger members who sign up online, presenting a potential challenge in retaining this demographic.

▶The impact of tariffs is a subject of legal and operational focus, with Costco actively mitigating their effects by shifting production and sourcing, while also facing a class-action lawsuit from customers seeking refunds if the company receives tariff rebates.

Key themes

▶The Membership Flywheel

Costco's core business model is centered on its membership fee structure. This revenue stream allows the company to offer products at extremely low margins (reportedly 11-14%), creating a powerful value proposition that drives member acquisition and loyalty. Multiple sources confirm that the company's net income is almost entirely derived from these fees, not from product sales.

This model creates a formidable competitive moat, as customer loyalty is tied to the annual subscription and perceived value, making the business less susceptible to item-level price competition from rivals.

▶Operational Supremacy

The company operates with extreme efficiency, highlighted by a highly curated inventory of approximately 4,000 SKUs, compared to over 100,000 at competitors like Walmart. This focus, combined with high sales volume, results in an average inventory turnover of just 27 days, allowing Costco to operate with negative working capital by collecting customer payments before paying its suppliers.

This financial structure provides a significant, self-funding cash flow advantage that can be reinvested into growth, lower prices, and employee wages without heavy reliance on external financing.

▶Strategic Growth and Adaptation

While maintaining its successful warehouse model, Costco is pursuing aggressive global expansion, targeting over 30 new stores annually. The company is also adapting to market shifts by embracing e-commerce, which saw over 22% growth in Q2 2026, and pioneering creative real estate solutions like building affordable housing above stores to penetrate dense urban markets.

Costco's significant investments in digital channels and innovative real estate demonstrate that it is not a static brick-and-mortar retailer, but a dynamic organization actively evolving to capture future growth.

▶Valuation and Investor Sentiment

Costco's consistent performance has resulted in a premium market valuation, with claims of it trading at twice the multiple of Amazon and its P/E ratio reaching the 50s. This high valuation has led at least one named investment firm, WCM Investment Management, to exit its position. The discourse reflects a tension between the company's undeniable business strength and investor concerns about whether the current stock price fully reflects this success.

For investors, the central question is whether Costco's durable business model and consistent growth can continue to justify its premium valuation, or if the high multiple presents a significant risk of future underperformance.

Source episodes

Sentiment over time

Not enough data for timeline

Changes over time

Foundational Period

The company's business model is established, heavily influenced by Sol Price's Price Club concept, with a core philosophy of creating a "fiduciary relationship with the customer."

1987

Co-founder Jeff Brotman becomes an early investor in the acquisition of Starbucks and later serves on its board, establishing a key strategic partnership that involved selling Starbucks beans in Costco warehouses.

September 2024

Costco implements a membership fee increase in the U.S. and Canada, a move that is cited as accounting for approximately one-third of its membership income growth by Q2 FY2026.

Q1 FY 2026

The company reports strong results, including 8.2% net sales growth and 20.5% e-commerce growth. It revises its full-year new warehouse opening plan down to 28 due to construction delays in Spain.

Q2 FY 2026

Growth accelerates, with net sales up 9.1% and digitally enabled sales up 22.6%. The company reaffirms its plan for 28 net new warehouses for the fiscal year and announces a long-term target of over 30 new openings per year.

Suggested prompts

How sustainable is Costco's high valuation given the claims that some investment managers are exiting their positions due to its P/E multiple? &nearr;What are the primary risks associated with the slight decline in the U.S. & Canada membership renewal rate, especially as the company attracts younger, digitally-native members? &nearr;How can Costco leverage its rapidly growing digital business (22.6% growth in Q2) to enhance its core warehouse model without cannibalizing in-store traffic? &nearr;Given the conflicting data on sales per square foot, what is the most accurate measure of Costco's store productivity relative to competitors like Trader Joe's and Walmart, and what drives this efficiency? &nearr;

Key concepts

Financial Performance (FY2026) 4 ep Membership Model & Fees 4 ep Expansion & Real Estate Strategy 4 ep Competitive Landscape 4 ep E-commerce & Digital Growth 3 ep Kirkland Signature (Private Label) 3 ep Valuation & Investor Relations 3 ep Founding Philosophy & History 3 ep Legal & Regulatory Issues 3 ep Operational Efficiency 2 ep

Notable quotes

“They make money from the membership. So they'll charge you like something like $100 a year to join Costco. And if you look at their net income, it's basically the number of memberships... times the price of the membership. That's their net income.”

Alex · The Death of Search: How Shopping Will Work In The Age of AI

“Costco sells through its entire inventory in an average of 27 days, allowing it to operate with negative working capital by collecting customer payments before its vendor payment terms (typically net 30) are due.”

David Rosenthal · 10 Years of Acquired (with Michael Lewis)

“WCM Investment Management exited its position in Costco due to its high valuation, which reached a P/E multiple in the 50s.”

Sanjay Ayer · Mike Trigg and Sanjay Ayer – The Discipline of Getting Better at WCM (EP.467)

“Walmart and Costco are trading at a multiple twice as high as Amazon right now.”

Ed · Is Wall Street Wrong About AI? | Prof G Markets

Report last updated: Apr 21, 2026

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