Costco's Membership Model Continues to Deliver Predictable Growth

Costco Wholesale Corporation’s COST membership-driven business model remains a key competitive advantage, driving reliable revenue growth and strong cash flow. High renewal rates and disciplined pricing continue to differentiate the company from traditional retailers. In the first quarter of fiscal 2026, membership fees increased 14% year over year to $1,329 million, underscoring why membership income is one of the company’s most dependable growth levers.

Management said last September’s U.S. and Canada fee increase contributed a little under half of the membership income gain, while membership income still grew 7.3% year over year, excluding the fee increase and FX. This was driven by continued growth in the membership base and increased upgrades from Gold Star to Executive.

The membership base continued to expand, ending the quarter with 81.4 million paid memberships, up 5.2%, and 145.9 million cardholders, up 5.1% year over year. A key contributor to membership income was the 9.1% increase in executive memberships to 39.7 million. Executive members now represent 74.3% of total sales.

Renewals remained high at 92.2% in the United States and Canada and 89.7% worldwide. A modest 10-basis-point sequential dip reflected faster growth in younger, digitally signed-up members who renew at slightly lower rates. However, targeted outreach to expiring members helped offset some of the pressure. 

The quarter highlighted how Costco’s membership income remains stable and recurring. The combination of pricing leverage, expanding paid households and executive upgrades reinforces the role of membership fees as a dependable earnings contributor even when the sales environment is not conducive. This cycle of loyalty and recurring revenues ensures that the warehouse operator remains well-positioned to deliver consistent performance irrespective of broader economic fluctuations.

Walmart & BJ’s Wholesale Snapshot on Membership Income

Walmart Inc. WMT reported global membership fee income growth of 17% during the third quarter of fiscal 2026, reflecting momentum across Walmart+ and Sam’s Club. Walmart noted double-digit growth in Walmart+ fee income in the United States, while Sam’s Club delivered growth in member counts, renewal rates and premium Plus membership penetration. As a result, Walmart continues to diversify profit streams by embedding membership income more deeply into its broader omnichannel model, reinforcing its role as a steady and recurring contributor alongside core retail operations.

BJ’s Wholesale Club Holdings, Inc.’s BJ membership fee income jumped 9.8% to $126.3 million during the third quarter of fiscal 2025, reflecting strength in member acquisition, retention and higher-tier penetration. BJ’s Wholesale highlighted tenured renewal rates of roughly 90% with a strong higher-tier penetration of 41%. BJ’s Wholesale benefits from rising higher-tier membership adoption, which improves the quality and predictability of membership income.

What the Latest Metrics Say About Costco

Costco stock has jumped 10.6% over the past month compared with the industry’s growth of 5.4%.

From a valuation standpoint, Costco’s forward 12-month price-to-earnings ratio stands at 46.25, higher than the industry’s 33.53 but below its 12-month median of 48.32. 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 7.8% and 12%, 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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