好市多

Costco's fiscal fourth-quarter results included an 11.2% net sales increase and a 6.7% comparable sales gain when excluding the impact of fuel and foreign exchange. Diluted EPS rose 15% to $6.75, while core merchandise margin increased 18 basis points, excluding tariff refunds and reinvestment.

Why it matters: We believe Costco's expanding profitability and exceptional membership loyalty (consistently around 90%) reinforce its competitive advantage. We commend the firm as it successfully navigates a tepid macro environment by leveraging its pricing authority to garner outsize wallet share. Global traffic increased 3.3% as members responded to value and newness. We're encouraged by strength in nonfood categories (up by mid- to high single digits) like home and electronics, showing Costco can drive discretionary demand even as consumers remain selective when spending. Membership fee income rose 7.3% on record executive member penetration (over 50%, from 48% in fiscal 2025). We forecast this high-margin revenue stream to nearly double over our explicit forecast, underwriting Costco's ability to maintain price leadership without hitting profitability.

The bottom line: We plan to raise our $740 fair value estimate for wide-moat Costco by a low-single-digit percentage due to the time value of money. We view shares as roughly 20% overvalued and believe the current share price implies unrealistic operating margin expectations. We forecast operating margins to average 4.4% over the next decade (up from 3.9% in fiscal 2026), versus the market's implied 5.5%, which we see as overly optimistic given intense competition and lower returns on new units as its core US market matures.

Coming up: Costco's capital expenditures are increasing to $7.4 billion (from $6.4 billion), driven by a target of 30 new warehouses per year (up from 25 in fiscal 2026) for the midterm to long term, which we believe should support our 7.4% revenue CAGR over the duration of our forecast.

We have raised our fair value estimate for wide-moat Costco to $770 per share from $740, reflecting the time value of money, following fiscal 2026 fourth-quarter results. The firm delivered an 11.2% increase in net sales and a 6.7% comparable sales gain (excluding fuel and foreign exchange), driving a 15% rise in diluted earnings per share to $6.75. We commend Costco for successfully navigating a tepid macro environment to capture outsize wallet share, generating a 3.3% increase in global traffic as members responded to value in discretionary nonfood categories like home and electronics, which grew by mid- to high single digits. Profitability and membership metrics also expanded, with core merchandise margins rising 18 basis points and membership fee income climbing 7.3% as executive member penetration reached a record of over 50%. Our revised valuation implies a fiscal 2027 enterprise value/adjusted EBITDA multiple of roughly 21 times.

Costco US remains the primary earnings driver, representing about 73% of consolidated revenue and, together with Canada, roughly 83% of operating income. We forecast gross US revenue to expand at a 7.1% CAGR, driven by average traffic and ticket growth of 4.1% and 1.2%, respectively, steady warehouse expansion of about 16 units annually, and continued growth in executive memberships. We believe Costco will continue to gain market share in the US by reinforcing its price leadership and membership loyalty, driven by deep vendor relationships, disciplined cost controls, and a curated merchandise mix that consistently delivers value. Canada should see mid-single-digit sales growth, further building upon its strong segment-level efficiency.

We estimate Costco international growth at a 9.5% CAGR, reflecting an average of 12 new stores per year in markets such as South Korea, Japan, Mexico, and Taiwan. These regions are expected to accelerate their profit contribution, with international overtaking Canada to represent nearly 20% of operating income by the end of our forecast (up from 17% currently). Early successes abroad highlight the adaptability and profitability of the warehouse club model, with disciplined site selection, strong customer reception, and rising global renewal rates, making international Costco’s clearest long-term growth lever.

Membership income is a critical underpinning of our valuation. We project total memberships to reach over 135 million by the end of the forecast period. With renewal rates hovering around 90% and executive membership penetration climbing, we anticipate membership fee income to nearly double, providing a recurring, high-margin income stream that underwrites reinvestment in price leadership while maintaining profitability.

By bringing these pillars together, we project that consolidated revenue will compound at 7.2%. After year five, growth should tilt more heavily toward international as the US footprint approaches saturation. Finally, we model operating margins to rise from 3.9% in fiscal 2026 to 4.9% by the end of the explicit forecast, driven by membership growth, SG&A leverage, and greater private-label contribution.

We assign Costco a wide economic moat rating, underpinned by its cost advantage and intangible assets, which are both reinforced by the firm’s membership-driven business model, operational discipline, and brand trust. Over the past five years, Costco has generated an average return on invested capital of 24.6%, well above our 7% cost of capital estimate, and we expect these returns to persist for at least two decades.

Costco’s cost advantage stems from three structural efficiencies: scale, merchandising discipline, and minimal overhead. Costco is one of the largest global retailers, providing it with tremendous purchasing leverage. Its limited stock-keeping units—offering about 4,000 SKUs in its warehouses versus 100,000 or more at traditional grocers—support a more streamlined supply chain procurement process and yield lower per-unit costs, which are passed directly to members, especially on grocery goods, where select items deliver over 30% in per-ounce savings versus major supermarkets. With over $275 billion in sales and a commanding 60% share of the US warehouse club market, according to Euromonitor, Costco can purchase merchandise in bulk at favorable terms and spread fixed costs (distribution, administrative, and IT) over a large sales base. Its operating model—high volume per SKU, cross-docking distribution, minimal inventory handling, membership fee-based model, and no costly store fixtures or advertising—yields industry-low operating expenses with selling, general, and administrative expenses representing 9% of sales versus roughly 20% at Walmart and Target. As a result, Costco can profitably sell products at prices that competitors with higher costs cannot match.

Complementing its cost edge, Costco has also built a strong brand known for quality and low prices, earning deep trust from club members. The membership model itself creates a sense of exclusivity and loyalty, where members feel invested and shop to maximize the value of their annual fee. Costco’s brand equity is evident in its roughly 90% membership renewal rate, which has held steady over the years regardless of the economic backdrop. The company’s refusal to mark up products beyond a fixed modest margin and its famous loss-leaders (like the $1.50 hot dog or $4.99 rotisserie chicken) reinforce its intangible assets: a brand reputation for putting customer value first. Moreover, Costco’s “no frills,” treasure-hunt shopping experience creates customer enthusiasm that traditional retailers struggle to achieve.

Costco’s brand and cost advantages reinforce each other. Its trusted brand draws more members and sales volume, increasing scale and lowering unit costs, which allows even lower prices that further strengthen the brand’s value promise. This self-reinforcing cycle is a hallmark of Costco’s wide moat. This can also be seen in the company’s private-label offering, Kirkland Signature, which comprises almost 33% of net sales, providing higher margins for Costco while reinforcing the value proposition for customers.

Costco’s competitive dominance is exemplified by sales per square foot of over $2,000, more than double Walmart's and nearly 5 times Target's. In our view, its US operations (more than 70% of sales) benefit from decades of infrastructure development, vendor relationships, and real estate scale. Inventory turns remain best in class at about 30 days compared with Walmart’s 40 days and Target’s 61 days. Even compared with its closest competitor, Costco is far more profitable ($77 in EBIT per square foot versus $26 at Sam’s Club); Sam’s Club (33% share of the warehouse club market) boasts sales per square foot of just $1,150, despite launching in the same year as Costco and operating a similar size store base in the US (Costco 629, Sam’s Club 600). We attribute this differential partly to the fact that Costco caters to a more affluent customer base, with an average household income of around $125,000 versus just $80,000 at Sam’s Club. Because bulk buying tends to come with a higher absolute price tag, warehouse clubs are more tenable for higher-income shoppers. Additionally, Costco’s membership base continues to climb steadily, and members per warehouse have been increasing over time. Based on our estimates, members per warehouse averaged over 87,000 in the past fiscal year, up from around 59,000 in 2010. Growing members per location suggests Costco is deepening penetration and loyalty over time, rather than cannibalizing its footprint, which supports its competitive edge and spreads fixed costs over a larger member base.

In Canada (just a midteens percentage of revenue), Costco’s position is even greater, as it faces less direct competition and often commands higher average transaction values with roughly $2,352 and $116 in sales and EBIT per square foot, respectively. Despite higher wage pressures and regional cost variance, we posit Costco Canada remains the company’s strongest segment with efficient store-level operations and limited geographic sprawl.

Internationally, we estimate that Costco’s ROIC has been rising over the last decade (averaging 16%) and that this trend will likely continue. Costco’s international success has primarily been the result of carefully selecting new markets to enter and differentiating itself from existing retailers, allowing it to attract customers with little direct warehouse club competition. Globally, Costco has 53% market share in the warehouse club industry, including 65% share in South Korea, 25% in Mexico (behind Sam’s Club’s 72%), and captures the entire market in Japan, Australia, France, and the United Kingdom. Management has stated plans to allocate more of its new-store openings to international markets in the coming years, and we believe its historical success indicates the company has a unique ability to tailor its product offerings to consumer preferences across countries.

Executive membership penetration continues to rise (1% higher than a decade ago), lifting the profitability of Costco’s recurring fee base and merchandise sales, as these members spend 3 times more on average than a basic member.

Kirkland Signature’s 33% sales penetration strengthens Costco’s brand equity while providing margin accretion in staple categories.

International warehouses in South Korea and Taiwan are producing among the chain’s highest sales volumes, suggesting durable global demand and that its brand power is resonating across borders.

Expansion into markets with stricter labor laws and zoning restrictions, such as parts of Europe, could slow Costco’s growing footprint and ability to further replicate its US model.

A decline in membership renewal rates (amid constrained consumer spending), currently around 90%, could weaken Costco’s most durable profit engine and its ability to reinvest in prices without impairing operating margins.

Digital sales remain at 7% of revenue, and continued underinvestment in e-commerce and last-mile fulfillment could cause Costco to lag peers in higher-margin discretionary categories.