Costco Wholesale Corporation (NASDAQ: COST ) is the hero of the post-COVID world. While that is my opinion, it is supported by the data. The events of 2020 led to a massive increase inHarrison is a financial analyst who has been writing on Seeking Alpha since 2018 and has closely followed the market for over a decade. He has professional experience in the private equity, real estate, and economic research industry. Harrison also has an academic background in financial econometrics, economic forecasting, and ...

Group 1: Industry Overview - Global consumption has been experiencing persistent weakness, with the retail sector in a downward phase [1] - In China, the total retail sales reached 48.79 trillion yuan last year, showing a year-on-year growth of 3.5%, but the growth rate has declined by 3.7 percentage points compared to 2023 [1] - In the first three quarters of last year, retail sales of 50 major retail enterprises in China fell by 5%, with at least 38 malls closing, 76% of which had been operating for over 10 years [3] Group 2: Costco's Resilience - Costco has maintained a compound annual growth rate of 8.8% in revenue over 20 years, with only one instance of negative growth during the 2008 financial crisis [3] - The company ranks 20th in the Fortune Global 500, with a market value exceeding 450 billion USD and over 890 warehouse stores worldwide [3] Group 3: Business Model Insights - Costco relies on a membership model, generating significant revenue from membership fees rather than solely from product sales [4] - As of 2024, Costco has 76.2 million paying members, with membership fee income reaching 4.828 billion USD, accounting for 65% of the company's net profit [6] - The membership renewal rate is notably high at 92.7% in North America, allowing Costco to offer low-priced products and create a positive feedback loop [6] Group 4: Product Strategy - Costco employs precise product selection and collaborates with well-known brands to ensure high-quality, cost-effective products [7] - The company utilizes data analysis and AI to predict consumer purchasing preferences, enabling customized recommendations [7] - Limited edition and seasonal products are introduced to enhance customer experience and stimulate purchasing impulses [9] Group 5: Operational Efficiency - Unlike typical supermarkets that offer a wide variety of products, Costco limits its SKU count to around 4,000, significantly lower than the typical 30,000 [10] - This strategy enhances operational efficiency, reduces management costs, and improves warehouse and logistics efficiency [10] - Costco provides a customer-friendly return policy, allowing members to return items without conditions, which alleviates customer concerns [10]

Core Insights - Costco Wholesale Corporation reported a 5.7% increase in comparable sales for Q4 of fiscal 2025, indicating strong momentum in retail activities despite economic challenges [1][8] - Net sales for the quarter reached $84.4 billion, an 8% increase from $78.2 billion in the previous year, showcasing robust demand across various regions and sales channels [4][8] Sales Performance - U.S. comparable sales rose by 5.1%, Canada by 6.3%, and Other International markets surged by 8.6%, highlighting strong international growth [2][8] - E-commerce comparable sales climbed 13.6%, driven by the expansion of logistics and flexible payment options [2][3][8] Strategic Insights - The growth in international markets suggests diversification benefits as Costco expands its global footprint [3] - The combination of digital growth and consistent performance in physical locations underscores the effectiveness of Costco's omnichannel strategy [4] Industry Context - Walmart reported a 4.6% increase in U.S. comparable sales, while Target experienced a slight decline of 0.9% in sales, indicating varying performance trends within the retail sector [5][6] Valuation Metrics - Costco's forward 12-month price-to-earnings ratio is 48.55, higher than the industry average of 30.63, indicating a premium valuation [9] - The Zacks Consensus Estimate for Costco's current financial-year sales implies an 8.2% year-over-year growth [10]

Core Insights - Costco Wholesale's shares have significantly increased, doubling from levels in 2023, with earnings multiples rising to the low fifties, resulting in an earnings yield below 2% due to strong business performance [1] Group 1: Company Performance - Costco's stock performance has been exceptional, with shares doubling in value since 2023 [1] - The company's earnings multiples have reached the low fifties, indicating a strong market valuation [1] - The earnings yield has fallen below 2%, reflecting the impact of robust business performance on stock valuation [1] Group 2: Investment Opportunities - The investing group "Value In Corporate Events" provides members with opportunities related to IPOs, mergers & acquisitions, earnings reports, and corporate capital allocation changes [1] - The group covers approximately 10 major events each month, focusing on identifying the best investment opportunities [1]

Core Viewpoint - Costco Wholesale is preparing to report its fiscal fourth-quarter 2025 earnings, with investor focus on its membership model, margin management, e-commerce growth, and external challenges like tariffs and supply-chain issues [1] Financial Performance - Costco's August sales report indicated net sales of $21.6 billion, reflecting an 8.7% increase from the same quarter last year, positively impacting stock performance [2] - The company reported third-quarter fiscal 2025 net sales of approximately $62 billion, an 8% year-over-year increase, with net income of $1.9 billion or $4.28 per share, surpassing consensus estimates [6] - Membership fee income rose by 10.4% year-over-year to $1.2 billion [6] Sales and Growth Metrics - Global comparable store sales increased by 5.7%, with U.S. sales up 6.6%, Canada up 2.9%, and Other International locations up 3.2% [7] - Adjusted for gasoline price volatility and foreign exchange effects, U.S. comparable sales growth was 7.9%, Canada 7.8%, and Other International 8.5% [7] - E-commerce sales saw a comparable growth of 14.8%, adjusted to 15.7% [7] Stock Performance - COST stock has seen a modest year-to-date increase of 6% and a similar rise over the past 52 weeks, although it currently trades about 10% below its 52-week high of $1,078.23 [4] - The stock is valued at 48.58 times forward earnings, which is considered high compared to industry peers [5]

Core Insights - Costco Wholesale has achieved a total return of 733% over the past decade, making it the third-largest retailer globally, following Walmart and Amazon [1] Group 1: Financial Performance - In the fiscal 2025 third quarter, Costco reported net sales of $62 billion, showcasing its significant market presence [1][3] Group 2: Competitive Advantage - Costco's business model involves selling a limited number of stock-keeping units (SKUs), averaging around 4,000, compared to the 30,000 typically found in supermarkets, allowing for high volume sales of fewer products [3] - The company's scale provides a powerful cost advantage, enabling it to negotiate better terms with suppliers and pass on savings to customers [4] Group 3: Customer Engagement - Memberships at Costco have increased by 6.8% year-over-year in Q3, with a high renewal rate of 90.2%, indicating strong customer loyalty [4] Group 4: Investment Considerations - Despite Costco's strong performance and growth potential, the current price-to-earnings ratio stands at 54.2, suggesting that it may not be the right time to purchase shares [5]

Core Insights - Costco Wholesale Corporation is highlighted as a stock to invest in before a potential stock split, with a Buy rating and a price target of $1,060 from Evercore ISI ahead of its Q4 2025 earnings report [1][3] Financial Performance - In Q3 2025, Costco reported net sales of $61.96 billion, an increase of 8% from $57.39 billion the previous year [2] - Net income rose over 13% to $1.9 billion, translating to $4.28 per diluted share, up from $1.68 billion or $3.78 per diluted share a year ago [2] - Total comparable sales increased by 5.7%, with US comparable sales growing by 6.6% and Canadian sales up by 2.9% [2] Membership and E-commerce Growth - E-commerce sales saw a significant increase of 14.8% in comparable sales [3] - Membership fee income for the quarter reached $1.24 billion, a 10.4% increase or $117 million year-over-year [3] - The number of paid household members grew to 79.6 million, a 6.8% increase, while Executive Memberships rose by 9% to 37.6 million, accounting for 73.1% of worldwide sales [3] - The renewal rate for memberships in the US and Canada was notably high at 92.7% [3] Company Operations - Costco operates membership warehouses in various countries including the US, Canada, Mexico, Japan, the UK, and several others [4]

Core Insights - The article highlights two top-tier growth stocks, Costco Wholesale and Amazon.com, as potential long-term investment opportunities due to their effective business strategies and market positions. Group 1: Costco Wholesale - Costco has maintained growth since its founding in 1983 by offering a curated selection of quality products at bargain prices, a strategy expected to continue for decades [3][4] - The company operates over 900 stores globally and achieved sales of $270 billion in its most recent fiscal year ending August 31 [4] - Costco's focused buying power allows it to stock around 4,000 items, significantly fewer than competitors, enabling it to secure substantial discounts from suppliers [5] - The company provides higher pay and benefits to its employees compared to many competitors, which enhances employee morale and retention [5] - Costco's membership renewal rates consistently exceed 90%, indicating high customer satisfaction and loyalty, even after membership fee increases [6] - The company's strategy benefits employees, customers, and shareholders, with expectations for continued growth in purchasing power and stock price [7] Group 2: Amazon.com - Amazon employs a successful business model focused on offering a vast selection of goods, low prices, and convenient delivery options, positioning it as a leader in online retail [8][9] - The global retail e-commerce market is projected to exceed $12.3 trillion by 2030, providing significant growth opportunities for Amazon [9] - Amazon Web Services (AWS) is a leading provider of cloud infrastructure services, with sales of $116 billion and operating profits of $43 billion over the last 12 months, growing at 18% [10][11] - The company's partnership with AI pioneer Anthropic is expected to drive further growth in its cloud computing operations [11] - Amazon is also a major player in the digital advertising market, leveraging its AI capabilities to deliver targeted ads, with the digital ad market projected to exceed $1.2 trillion in the next five years [12]

Core Insights - Costco has achieved consistent market share gains in the grocery sector over the past five years, largely attributed to the success of its private label brand, Kirkland Signature, which has been in the market for 30 years [2][3]. Group 1: Kirkland Signature Performance - Kirkland Signature generates approximately $86 billion in annual sales, accounting for about one-third of Costco's total revenue [3]. - In comparison, Kroger's private label brands generated $32 billion last year, representing around 25% of its total sales excluding fuel [3]. Group 2: Product Range and Strategy - The Kirkland Signature label encompasses around 600 products across various categories, including batteries, pet food, wine, and bath tissue [4]. - Best-selling products under the Kirkland brand include eggs, bottled water, and butter, which are essential items that drive customer trips to grocery stores [4]. Group 3: Unique Brand Strategy - Costco is recognized as a pioneer in private label branding, emphasizing quality and requiring CEO approval for new product additions to the Kirkland line [5]. - Unlike many retailers that offer multiple private label brands to cater to different market segments, Costco focuses solely on Kirkland Signature, which serves as a significant negotiating tool with suppliers [5][6]. Group 4: Market Position - After 30 years, Kirkland Signature has established itself as a leading private label brand and continues to gain momentum in the market [7].

Marketing Strategies - Costco employs loss leader pricing on items like hot dogs and chickens to build customer trust and drive overall sales [1] - The company utilizes strategic store layouts with minimal signage to encourage unplanned purchases and increase browsing time [1] - Costco uses large shopping carts to create a perception of smaller purchase volume, prompting customers to buy more [1] - Free samples are offered to stimulate cravings and increase sales of sampled products [1] - Bulk selling encourages customers to purchase quantities exceeding their immediate needs [1]