Costco's Renewal Rate Slips to 89.8%: Temporary Dip or New Normal?

Costco Wholesale Corporation’s COST core membership model faced a slight hiccup in the final quarter of fiscal 2025, with the worldwide renewal rate easing to 89.8% from 90.2% in the preceding quarter. U.S. and Canada membership renewal rate stood at 92.3%, down 40 basis points on a sequential basis. This figure is a marginal step down from previous high-water marks and raises the question of whether this is a temporary blip or a signal of market saturation.

The decline, attributed to a rising share of online sign-ups, follows a surge in digital membership growth, including a large Groupon campaign in December 2023 that introduced younger members to the brand. While management emphasized that online members renew at slightly lower rates, it also views this trend as a positive evolution that expands Costco’s reach to a new demographic. 

Nearly half of new members are now under 40, signaling an important generational turnover within the company’s member base. Costco’s challenge will be to engage these digital-first shoppers effectively through auto-renewal programs and targeted communication that deepens brand loyalty beyond initial discounts. 

The renewal rate remains historically strong but could see minor pressure as the new mix of online members continues to flow through the system. Management expects this dynamic to persist for a few quarters before stabilizing. For a company known for decades of consistency in membership metrics, the shift underscores a new balancing act between digital expansion and retention discipline. 

The question now is whether Costco’s push into online acquisition marks a temporary dip in loyalty or the beginning of a redefined membership model in the digital era. Costco reported a 14% year-over-year increase in membership fee income during the fourth quarter of fiscal 2025, reaching $1,724 million.

Walmart & BJ’s Wholesale Snapshot on Membership Income

Walmart Inc. WMT is leaning heavily into membership economics as Walmart+ and Sam’s Club continue to deliver outsized growth. In the second quarter of fiscal 2026, Walmart reported a 15.3% surge in global membership fee income, outpacing overall sales growth. Walmart+ delivered double-digit growth in fee income, while Sam’s Club posted a 7.6% rise fueled by higher Plus member penetration. Management emphasized that Walmart’s membership strength is now a critical profit lever alongside advertising and e-commerce, giving Walmart the flexibility to offset rising costs and reinforce its price leadership.

BJ's Wholesale Club Holdings, Inc. BJ is also showing notable traction in membership fees, supported by its digital ecosystem. BJ’s Wholesale posted record membership income of $123.3 million in the second quarter of fiscal 2025, up 9% from last year, with total membership reaching 8 million. BJ’s Wholesale noted that digitally engaged members are twice as valuable as in-club-only shoppers, underscoring how technology integration and higher-tier penetration, now at 41%, are fueling loyalty and retention.

What the Latest Metrics Say About Costco

Costco stock has risen 4.7% over the past year, underperforming the industry’s growth of 6.9%.    
 

From a valuation standpoint, Costco's forward 12-month price-to-earnings ratio stands at 46.02, higher than the industry’s ratio of 29.94. COST carries a Value Score of D.
 

The Zacks Consensus Estimate for Costco’s current financial-year sales and earnings per share implies year-over-year growth of 7.7% and 11%, respectively. 
 

Costco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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