Costco Wholesale Corporation (COST) Stock Analysis

Costco’s primary competitive advantage is its ability to deliver high-quality goods at consistently lower prices than rivals, underpinned by a disciplined, low-markup model. Average merchandise markups are in the low double digits (12–13%), compared to 25–35% or more at traditional retailers such as Walmart, Target, and Amazon. This pricing discipline is reinforced by a limited SKU count (about 3,600 per warehouse), enabling greater purchasing leverage and inventory efficiency.

The membership model is another durable edge. With 79.6 million paid memberships and a 92.7% renewal rate in the U.S. and Canada, Costco enjoys recurring, high-margin fee income ($4.8 billion in FY24). Executive memberships, which account for over 73% of sales, further cement loyalty and drive higher spend per customer.

Operational efficiency is evident in labor costs and logistics. The average U.S. hourly wage is $31, well above industry norms, supporting low turnover and high service standards. Costco’s vertically integrated logistics, including its own delivery network for bulky items, enhances customer experience and cost control.

Compared to Sam’s Club (Walmart) and BJ’s, Costco’s international scale (914 warehouses projected by FY25) and private-label strength (Kirkland Signature) are unmatched. However, threats include intensifying e-commerce competition and potential margin pressure from rising wages and tariffs. Nonetheless, Costco’s culture of cost discipline, member focus, and scale-driven bargaining power remain formidable barriers to entry.