Predicting Costco's Stock Price in Five Years Time

Costco Wholesale Corporation, the popular membership-only retailer, continues to thrive in the competitive market, as evidenced by its strong performance in the first nine months of fiscal 2025.

The company's adjusted comps rose a significant 8.1% year over year, indicating a growing customer base and increased sales. This growth can be attributed to Costco's strategic approach, which includes the expansion of its e-commerce ecosystem and logistics network, as well as the opening of 25 to 30 new warehouses each year from fiscal 2024 to fiscal 2027.

Costco's business model, which allows it to sell products at nearly break-even margins due to annual membership fees, has been instrumental in maintaining its profitability. The company's gross margin, although dipping to 10.9% in fiscal 2024, has since recovered to 12.78% in the current year. This recovery can be credited to Costco's efforts to control costs and maintain low prices, despite inflation, intentional limits on markups, and currency headwinds for overseas warehouses.

One of the factors that make Costco's memberships more attractive is the ancillary services it offers, such as food courts, gas stations, and vision centers. These services contribute to the stickiness of the membership, encouraging customers to renew their subscriptions and continue shopping at Costco. In fact, Costco's global renewal rate was 90.2% in the third quarter of fiscal 2025.

Costco's private label, Kirkland, also plays a crucial role in its success. Promoted as a cheaper alternative to name brands, Kirkland products have become popular among Costco's customers, contributing to the company's sales growth.

Looking ahead, the Wall Street consensus expects Costco's earnings per share (EPS) to grow at an annual rate of about 8-10% and its revenues to increase by approximately 6-8% over the next five years. Costco's EPS grew at a compound annual growth rate (CAGR) of 16% from fiscal 2020 to fiscal 2024, despite gross margin compression, due to sales growth, membership fee increases, and scale diluting operating expenses.

As of the current date, Costco's stock price is $942.82, with a day's range of $940.58 to $948.74. The company's dividend yield is 0.52%. Costco's stock is traded on NASDAQ under the ticker symbol COST, and as of the third quarter of fiscal 2025, the company had 142.8 million cardholders and ended the quarter with 905 warehouses worldwide.

Costco's strategy of carrying a narrower selection of products but frequently rotating them with a "treasure hunt" strategy, coupled with its focus on negotiation with suppliers to keep prices low, ensures that the company remains competitive and attractive to its customers. The company's continued expansion and investment in its e-commerce ecosystem and logistics network indicate that Costco is well-positioned for future growth.