Costco Wholesale (COST +1.15%) is a well-known player in the retail industry, as it's one of the largest companies that operates in this market. The company's focus on selling high-quality goods in a wide range of product categories at extremely low prices makes it a favorite shopping destination for consumers. This business model has proven itself over long periods of time.
Between Jan. 20, 2021, and Jan. 20, 2026, Costco shares generated a total return of 182%. That's a fantastic gain. Maybe the future can be just as kind to investors. Where will this retail stock be in five years?
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Costco's growth is set to continue
Costco's massive warehouses create a no-frills environment with low prices on merchandise. There's a treasure hunt shopping atmosphere that creates an element of surprise. Consumers will agree that Costco provides a wonderful value proposition. This is demonstrated by the fact that there are 81.4 million membership households (as of Nov. 23, 2025), up 5.2% year over year, with a worldwide renewal rate of 89.7%.
The company generated massive revenue of $67.3 billion in the first quarter of fiscal 2026, ended Nov. 23, 2025. But it has grown impressively, as that top-line figure rose by 56% in the past five years. Net income is up 72% during the same period. Costco has historically been a compounding machine with its fundamental strength.
Investors can assume the growth will continue. There are currently 921 Costco warehouses across the globe. The business plans to open 21 net new locations over the last three quarters of fiscal 2026, and "30-plus" net openings per year in future years, CEO Ron Vachris said on the Q1 2026 earnings call.
What's noteworthy is that the leadership team still sees tremendous potential to expand the physical footprint here in the U.S., which might seem like a mature market. Costco is on pace to eventually open half of its new stores domestically each year and the other half internationally.
The analyst community forecasts Costco's revenue to increase at a compound annual rate of 7.6% between fiscal 2025 and fiscal 2028. That's a reasonable pace that will likely continue in the years following this outlook. And with the benefit of operating leverage, the bottom line should expand at a faster rate.
NASDAQ: COST
Key Data Points
Having a cost advantage keeps rivals at bay
Costco's success is a direct result of its massive scale. It has high revenue volume. And it only sells on average 4,000 stock-keeping units (SKUs) at its warehouses. This is a much smaller number of items than typical supermarkets offer. Consequently, Costco has enormous buying power with its suppliers. This results in favorable costs on merchandise, with savings passed to shoppers.
That cost advantage has been key to Costco's ongoing success, especially as the retail sector continues to evolve with technological changes. In the U.S., online shopping represented 7.2% of all retail spending a decade ago. That share has climbed to more than 16% today. Despite this secular trend, Costco has thrived, with more members and higher revenue and profits.
Don't expect valuation expansion
Costco stock never seems to be on the discount rack. In the past five years, the lowest price-to-earnings (P/E) ratio it traded for was 31.9. That's much more expensive than the S&P 500 index's current P/E multiple. Investors appreciate this business, which is understandable because it's a steady performer, has staying power, and keeps growing. It's hard to find any issues.
However, I think buying shares today would be a mistake. The current P/E ratio of 51.9 is a level that's difficult to get excited about. I see zero margin of safety right now. The steep starting valuation means that investors should not expect valuation expansion. In fact, I think there's a good chance that the P/E multiple will come down in the future, introducing a potential headwind for shareholders to think about. The stock could underperform the market over the next five years.
