As of early 2026, Costco Wholesale Corporation continues to defy traditional retail gravity. While many brick-and-mortar entities struggle against digital-first competitors, Costco’s unique membership-based ecosystem has proven exceptionally resilient. This report examines the current efficacy of its business model, its international growth trajectory, and whether the stock remains a viable investment at current valuations.
Table of Contents
The Efficacy of the Costco Business Model
Costco’s primary engine of growth remains its membership flywheel. Unlike traditional retailers that rely on product markups for profit, Costco operates as a service provider that offers access to low prices. This model is not only still working but has accelerated in its efficiency through 2025 and into 2026.
- Membership Fee Growth: In the first quarter of fiscal 2026, membership fee income rose 14% year-over-year, reaching approximately $1.33 billion. This growth outpaces total sales growth, highlighting the high-margin, recurring nature of this revenue stream.
- High Retention Rates: Despite a membership fee hike in September 2024, renewal rates remain near historic highs—92.2% in the U.S. and Canada, and approximately 89.7% globally.
- Private Label Dominance: The Kirkland Signature brand now generates approximately $90 billion in annual revenue, serving as a powerful tool for member loyalty and margin protection.
- Digital Evolution: Costco has successfully integrated digital capabilities, with digitally-enabled comparable sales rising over 20% in late 2025. Innovations such as mobile “Scan & Go” and AI-driven inventory management in pharmacies have modernized the experience without eroding the “treasure hunt” atmosphere of physical warehouses.
Global Performance and Expansion Strategy
Costco’s footprint is expanding aggressively beyond the North American market. The company currently operates over 920 warehouses worldwide, with a clear focus on international diversification to offset domestic saturation.
International Market Metrics
In fiscal Q1 2026, “Other International” comparable sales (excluding gas and currency fluctuations) rose by 6.8%, outpacing the 5.9% growth seen in the United States. This indicates that the Costco value proposition is successfully translating across diverse cultural and economic landscapes.
2026 Development Pipeline
Costco has set a target for 28 net new warehouse openings in fiscal 2026. Key highlights of this expansion include:
- Mexico: The planned opening of a 200,000-square-foot warehouse in Monterrey, which will be the largest in Latin America.
- Asia and Europe: Continued infill and new market entries in Japan, South Korea, and Spain, despite occasional construction-related delays in the European sector.
- Logistics: Significant capital expenditure (projected at $6.5 billion for 2026) is being directed toward global supply chain optimization to maintain the low-cost leadership that defines the brand.
Investment Analysis: Is NASDAQ: COST Still a Buy?
The investment thesis for Costco in 2026 presents a classic conflict between business quality and stock valuation.
The Bull Case
Costco is a premier defensive asset. Its cash flow is predictable, its debt-to-equity ratio is exceptionally low (0.28), and it has a history of returning value to shareholders through special dividends. Analysts from firms like Jefferies and Telsey Advisory Group maintain price targets between $1,050 and $1,100, citing the company’s “outperform” potential driven by membership resilience.
The Bear Case (Valuation Risk)
The primary deterrent for investors is the “valuation gap.” Costco currently trades at a price-to-earnings (P/E) ratio of approximately 42x to 47x. This is significantly higher than the retail industry average of 29x. Critics argue that paying nearly 50 times earnings for single-digit revenue growth leaves no margin for error. If the market undergoes a valuation “rerating,” the share price could stagnate or decline even if the underlying business remains healthy.
Strategic Verdict
For long-term “buy and hold” investors, Costco remains a cornerstone retail holding due to its impenetrable moat and global growth runway. However, for value-sensitive or short-term investors, the current entry point carries high valuation risk. The stock is best utilized as a core component of a defensive portfolio, ideally acquired during market pullbacks rather than at record highs.