What Are Costco's Biggest Risks?

In the following video, Fool analysts Isaac Pino and Blake Bos look at some of the biggest risks facing Costco Wholesale (NASDAQ: COST  ) .

One of Costco's biggest opportunities is international expansion, but it's also one of its biggest risks, Blake says. Plenty of retailers have stumbled when expanding outside the U.S., including Home Depot (NYSE: HD  ) , which had to pull back from its expansion into China, Isaac adds.

Costco could face similar problems entering into markets where the culture is very different. Membership renewal rates have been slightly lower internationally, so it's something investors must watch.

Valuation is another risk. Costco sells at a premium, and retailers hit hurdles along the way. If it were to miss on earnings, it could take a hit, Isaac says.

Domestically, Costco is running out of opportunities to grow, Isaac says. At this valuation, he adds, that makes a runway for international growth even more important to Costco and its investors.

Costco's low prices haven't just benefited customers -- investors have seen their shares wallop the market, returning 11,000% over the past two decades. However, with prices near all-time highs, is the ride over for Costco investors? To answer that and more, we've compiled a premium research report with in-depth analysis on Costco. Simply click here now to gain instant access to this valuable investor resource.


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  • Report this Comment On January 21, 2013, at 12:52 AM, MiserblOF wrote:

    Wow, I don't know about not having opportunity to grow in the USA. I live in Upstate NY and there are three major hubs within an hour or so from me: Kingston, Albany, and Oneonta, and there is nary a Costco to be found. These are major shopping areas that each serve huge areas and populations.

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