Costco Wholesale

Costco is a membership warehouse club. Members pay an annual fee to shop in large, no-frills warehouses that carry fewer than 4,000 active items each, mainly groceries and household goods, sold at low markups. At May 10, 2026 it operated 928 warehouses, 637 of them in the United States and the rest mainly in Canada, Mexico, Japan, the United Kingdom, Korea, Australia, and Taiwan, plus e-commerce sites in eight countries.

Most revenue is net sales of merchandise: food and sundries, non-foods, fresh foods, and ancillary businesses such as gasoline, pharmacy, and travel. Membership fees are only about 2% of revenue but a far larger share of operating income, because merchandise is sold at thin margins. Growth comes from more paid members, higher renewal rates, higher fees, comparable warehouse sales, and new warehouses.

Paid members have grown every year and renewal rates are around 90% worldwide, which gives Costco a steady, high-margin fee stream. Membership fee increases, new warehouses in the United States and abroad, e-commerce, and the low prices that keep members loyal all support steady sales growth, and Costco has ample cash to fund expansion.

Costco’s low margins leave little room if costs rise or it must cut prices, and its profit depends heavily on membership fees and renewals. Heavy capital spending is running well above depreciation, so free cash flow is thinner than profit suggests. Wage pressure, consumer weakness, foreign-exchange swings, and a share price that already reflects strong growth are further risks.