Costco's Warehouse Expansion Strategy Fuels Long-Term Growth

Costco Wholesale Corporation COST is steadily expanding its footprint to strengthen its global presence, drive membership growth, and capitalize on rising demand for value-driven retail across both domestic and international markets. The company concluded the first quarter of fiscal 2026 with 921 warehouses worldwide.

During the quarter, the warehouse retailer opened eight new locations. This rollout included one relocation in Canada, a third warehouse in France, four net new U.S. locations and two additional Canadian business centers. Management plans to open 28 net new warehouses during fiscal 2026 and aims for 30 or more annual openings in subsequent years.

To support this volume, the company has expanded its real estate team and adopted creative site acquisition methods. Recent projects highlight a shift toward refurbishing existing structures, such as converting a Hypermart in France into a Costco warehouse and former home improvement stores in Canada into business centers. This strategy broadens expansion options while reducing the capital investment required for new builds.

Beyond new builds, the strategy includes relocating high-volume warehouses to larger sites with expanded parking and fuel stations. Five such relocations are planned for fiscal 2026,
including three in the United States, and one each in Canada and Taiwan. These moves aim to enhance the member experience and accelerate sales growth in established markets. 

New warehouses are reaching maturity faster, with fiscal 2025 openings generating an annualized $192 million in sales per location during the first year. This represents a significant increase from the $150 million sales recorded by new locations just two years prior. This improved performance underscores the effectiveness of the current expansion model in capturing market share.

What the Latest Metrics Say About Costco

Costco, which competes with Dollar General Corporation DG and Target Corporation TGT, has seen its shares up 1.6% in the past year compared with the industry’s growth of 11.9%. While shares of Dollar General have rallied 106.7%, those of Target have dropped 19% in the aforementioned period.
 

From a valuation standpoint, Costco's forward 12-month price-to-earnings ratio stands at 46.30, higher than the industry’s ratio of 31.93. COST carries a Value Score of D. Costco is trading at a premium to Target (with a forward 12-month P/E ratio of 14.43) and Dollar General (21.10).

The Zacks Consensus Estimate for Costco’s current financial-year sales and earnings per share implies year-over-year growth of 7.6% and 11.7%, respectively. For the next fiscal year, the consensus estimate indicates a 7.2% rise in sales and 9.2% growth in earnings.
 

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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