Costco Wholesale (COST 0.81%) has been an incredible stock to own over many decades, crushing the market as customers flock to its membership-only warehouse stores. It has managed to keep up strong growth in practically every kind of economy, and it has reported some of its highest growth when the economy has been weak.
The market has rewarded it with an increasing stock price and a correspondingly higher valuation. But Costco stock has been going through some uncharacteristic pressure this year, trailing the S&P 500's 18% year-to-date gains with a roughly flat stock price.
Is Costco's run finally over? Let's see where it could be in five years from now.
More members, more sales
Costco has a differentiated retail model that sets it apart from the competition. Although the concept of a membership model generally appeals to a more affluent crowd, Costco's rock-bottom prices make it attractive to a wide swath of the population, with savings that make up for the annual fee for customers who shop often.
The membership model has many benefits, including loyalty, the incentive to shop more to make the fee worthwhile, and a reliable and recurring revenue stream.
Costco makes most of its money from its membership fees, and although it's definitely a retailer, in some ways its real business is the memberships. It marks up products slightly to cover associated costs, and it's one retailer that brags about low gross margins instead of increasingly higher ones. That's its game. It keeps its warehouses bare bones, including leaving products on pallets, to keep costs down and pass along savings to the customer.
And it works. In the 2025 fiscal fourth quarter (ended Aug. 31), sales increased 8.1% year over year. Comparable sales (comps) were up 5.7%, and e-commerce remains a strong growth driver, up 13.6%.
Members continue to sign up at a healthy pace. Paid memberships increased 6.3% to 81 million in the quarter, while executive members, who pay double the standard $65 annual fee, increased 9.3%. Executive members now account for 47.5% of members and 74.2% of sales.
These are trends that have remained fairly consistent over many years, and over the next five years, investors can expect them to stay that way.
NASDAQ: COST
Key Data Points
New times, new services
Not everything is staying the same at Costco, though. E-commerce has emerged as an important piece of the business, but not necessarily in the way competitors are doing it. It isn't cost-efficient for Costco to ship groceries internally, so it's focused on selling large, bulky items through its digital channels, with the addition of installation and removal of the old item. That's how it leverages its edge in a changing retail landscape.
It's using digital in other ways, too. One of the reasons the market has been down on Costco stock is a lower renewal rate of 89.8% globally in the fourth quarter. Management says that's because of more online signups. The good part of that is that it's attracting younger customers, and it's working on generating higher online renewals through more targeted emails and auto-renewals.
It also recently launched a new benefit for executive members to get exclusive hours. That's in addition to several perks executive members enjoy, and honing in on this market is an important growth area for Costco.
Costco will keep adding new digital services over the next five years, but they're likely to be Costco-style, which means they won't necessarily be the same e-commerce services its competitors offer. Costco stands out for a reason, and it's very deliberate in how it rolls out new technology.
Is Costco stock still too expensive?
What about Costco stock? It's been quite expensive for years already, and investors seem to justify paying a premium for Costco stock because it's so reliable for growth and profits.
Even at the current price, which has barely moved this year despite the company's excellent performance, Costco stock trades at a P/E ratio of 50. That's what you often see in high-growth stocks, and it speaks to the market's confidence in Costco's potential.
There are likely to be further ups and downs for Costco over the next five years, and investors looking for higher growth might want to consider other stocks. But it's an excellent business and will likely provide value for long-term investors.
