🏪 Deep Dive: Costco ($COST) – Stability at a Premium | 05.04.25

Stability at a Premium | Analyzing Costco’s growth, valuation risks, and market trends in 2025. Is the membership giant still worth buying? Read more!

🏪 Deep Dive: Costco ($COST)

As of May 2, 2025 Simplify Wall Street | Premium Member Notes

📊 Company Overview

Costco remains a dominant force in the warehouse club model, thriving on membership-based recurring revenue and operational efficiency at scale.

  • Founded: 1983

  • Headquarters: Issaquah, Washington

  • Business Model: Annual memberships + high-volume retail + low overhead

  • Key Moat: Loyal member base, private-label strength (Kirkland), pricing power

📊 Financial Snapshot (as of May 2, 2025)

Metric

Value

Share Price

$1,008.30

EPS (TTM)

$17.14

PE Ratio (TTM)

58.83

Forward Dividend

$5.20

Dividend Yield

0.52%

52-Week Range

$746.48 – $1,078.23

Market Cap

$447.37B

Beta (5Y Monthly)

0.94

Ex-Dividend Date

May 2, 2025

Earnings Date

May 29, 2025 (est.)

🧩 Growth Drivers

1. Sticky Membership Economics

  • Over 130 million cardholders.

  • Membership revenue exceeds $5B annually with near-100% margin.

  • Renewal rate in U.S. and Canada exceeds 92%, creating a stable, recurring cash flow.

2. Private Label Strength — Kirkland Signature

  • Accounts for over 30% of sales.

  • Delivers higher margin than national brands while keeping prices low.

  • Brand loyalty for Kirkland rivals top CPG brands in trust and perception.

3. Global Expansion

  • Expanding in Japan, China, Korea, and Europe.

  • New stores in emerging markets show higher growth velocity than mature U.S. stores.

4. E-commerce and Delivery Growth

  • Building capabilities slowly but steadily.

  • Same-day delivery via Instacart and Uber Eats.

  • Growth in online grocery and prescription services.

🧱 Risk Factors

1. Valuation Premium

  • At nearly 59x earnings, Costco is priced like a tech growth stock, not a traditional retailer.

  • Any revenue or margin miss could lead to sharp multiple compression.

2. Thin Margins + Rising Costs

  • Operating margin remains under 4%.

  • Labor cost increases and inflationary pressures may erode earnings if not offset by volume.

3. E-commerce Gap

  • Costco’s digital experience still lags behind Amazon, Walmart, and Target.

  • Risk of younger, digital-native shoppers bypassing the in-store model entirely.

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