Core Insights - Costco's performance in 2025 was characterized by operational strength and strategic discipline, maintaining a premium valuation despite not outperforming the broader market [1][16] - Three key themes emerged from 2025 that explain Costco's continued confidence and high expectations among investors [2] Membership Model - The membership model remained a significant driver of Costco's performance, with membership fee revenue increasing to approximately $5.3 billion, reflecting a double-digit growth rate [4] - Paid memberships reached around 81 million households, with total cardholders at approximately 145 million and global renewal rates near 90%, indicating a strong customer retention [5] - Membership fees contribute a high-margin, recurring income stream, which is crucial given the thin margins in the retail sector [6][7] Sales Growth - Costco's net sales grew by about 8% in 2025, with comparable sales in Q4 increasing by 5.7%, driven by traffic growth and higher average ticket sizes [8] - The ability to maintain positive traffic growth amidst a challenging retail environment highlights Costco's strong value proposition [9] - Entering fiscal 2026, Costco reported over 8% revenue growth year-over-year in Q1, indicating sustained demand [10] - Steady sales growth is beneficial for long-term earnings power, supported by mid-single-digit comparable sales and new warehouse openings [11] Expansion and Digital Initiatives - In 2025, Costco opened 27 new warehouses, increasing its global store count to over 900, with a focus on international expansion, particularly in Asia [12] - Digital sales grew at a double-digit rate due to enhancements in online inventory access, delivery options, and checkout efficiency, aimed at improving membership value rather than directly competing with Amazon [13] - These initiatives support long-term growth while maintaining cost discipline, as new warehouses attract members and digital tools enhance customer engagement [14] Conclusion - Costco's 2025 performance underscored its reliable membership engine, steady sales growth, and disciplined expansion, reinforcing its position as a durable compounder in the market [16][17]