Over the last 30 years, Costco's (COST +0.15%) shares have generated a monster total return for investors of 17,000% (as of March 12). If you were able to spend $5,900 to buy this retail stock back then, you'd have over a $1 million balance in your portfolio right now.
But in 2026, is it too late to buy Costco? Here are two reasons why I believe this is unequivocally the case.
Image source: The Motley Fool.
Scale is a benefit, but it means slower growth
Costco's incredible success over the decades can be credited to its scale. The business reported net sales of $68 billion in Q2 2026 (ended Feb. 15). This figure makes it the world's third-largest retailer. That's a powerful position.
The average Costco warehouse has 4,000 different stock-keeping units (SKUs) on its shelves. Compared to the 30,000 SKUs that a typical supermarket might sell, this is significantly lower. When Costco acquires merchandise from its suppliers, it can obtain a major cost advantage. That supports low prices for shoppers. I don't see this competitive advantage weakening anytime soon.
But that scale also has a downside: Costco's historical pace of growth is sure to slow in the future. The company's net income increased at a compound annual rate of 13% between fiscal 2015 and fiscal 2025 (ended Aug. 31, 2025). Over the next 10 years, I'm certain this will decelerate.
That isn't to say the expansion story is over. Costco plans to open 28 net new warehouses in fiscal 2026, which would bring its total to 942. Management says there are plenty of opportunities to open new locations in the U.S. and abroad. As time passes, though, the white space will start to disappear as markets slowly become more saturated.
NASDAQ: COST
Key Data Points
The market's sky-high expectations will be difficult to satisfy
Anyone who follows this stock knows just how much the market appreciates Costco's business. This is obvious when you look at the stock's valuation. The shares carry a price-to-earnings ratio of 52.2. That's more than 100% more expensive than the S&P 500. You might also be surprised to learn that Costco trades at a 40% premium to Nvidia.
Investors are probably placing a premium on Costco because they view it as a very safe company to own. After all, this is a durable and time-tested business model.
However, the starting valuation makes me think that shares will produce weak performance in the years ahead. With the growth outlook already mentioned, that means it's too late to buy Costco.
