Over the past three decades, Costco Wholesale (COST 0.63%) shares have generated a total return of 15,480% (as of March 26). By expanding its store footprint, signing up more memberships, and growing profits in a durable manner, Costco been a wildly successful investment for its shareholders.
But could buying this retail stock today set you up for life?
Image source: The Motley Fool.
Three reasons why this is a great company
Investors are taking the right step by first focusing on Costco as a possible opportunity. That's because there are three reasons that this is a high-quality business.
The first reason comes down to its recession-proof nature. Costco sells merchandise like food and household items, among many other things, that people might need regardless of what's happening across the economy. This was true in the past several years, despite a pandemic, soaring inflation, rising interest rates, and softer consumer confidence. Same-store sales grew 7.4% in Q2 2026 (ended Feb. 15), and Costco is positioned to keep driving that higher.
Costco's massive scale, as demonstrated by fiscal 2025 net sales of $270 billion, is another reason this is a wonderful business. It's not going to be disrupted anytime soon. And it holds a dominant position in the world of retail, as that scale directly supports a persistent cost advantage that leads to everyday low prices for shoppers.
And lastly, Costco benefits from customer loyalty. This comes from its no-frills shopping environment, good customer service, and the low prices just mentioned. It's boosted by the company's membership model, which requires households to pay annual fees to shop at the company's warehouses. This brings in a high-margin, predictable revenue stream, with a worldwide renewal rate of almost 90% in the latest fiscal quarter.
NASDAQ: COST
Key Data Points
This business isn't going to produce life-changing returns
Throughout its history, Costco has been able to generate life-changing wealth for its earliest shareholders. I don't believe this will be the case going forward, though.
Even though management has plans in the future to open 30 or more net new warehouses every year, Costco isn't in a position to achieve outsized revenue and profit growth over the next decade and beyond, at least compared to its past. And this is table stakes for the stock to set investors up for life. Analysts expect diluted earnings per share to rise at a compound annual rate of 11% between fiscal 2025 and fiscal 2028.
The stock's valuation also gets in the way of investor returns. Costco's current price-to-earnings ratio of 51 is extremely expensive. Over the long term, there's a high likelihood that the multiple contracts.
Costco was a millionaire-making stock historically. That's not going to be true looking ahead.
