Costco Faces Challenges with Declining Membership Renewal Rates
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 15h ago
0mins
Should l Buy COST?
Source: Yahoo Finance
- Declining Renewal Rates: Costco's renewal rates have dropped to 92.2% in the U.S. and Canada and 89.7% globally, down 10 basis points from the previous quarter, indicating that the increase in digital memberships is negatively impacting renewals, which could pressure company revenues.
- Membership Income Growth: The company reported membership fee income of $1.329 billion, a 14% year-over-year increase, with the membership fee hike accounting for nearly half of this growth, demonstrating that despite declining renewal rates, the membership base continues to expand.
- Younger Membership Trend: Nearly half of new members are under 40, indicating Costco is attracting more younger, digitally-native consumers; however, this demographic tends to renew at lower rates, increasing future renewal challenges for the company.
- Response Strategy: Costco aims to improve renewal rates by enhancing engagement with digital members, although a slight decline is still anticipated over the next few quarters, yet the company remains optimistic about the initial success of its new communication strategies.
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Analyst Views on COST
Wall Street analysts forecast COST stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for COST is 1061 USD with a low forecast of 769.00 USD and a high forecast of 1205 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
24 Analyst Rating
19 Buy
4 Hold
1 Sell
Strong Buy
Current: 989.290
Low
769.00
Averages
1061
High
1205
Current: 989.290
Low
769.00
Averages
1061
High
1205
About COST
Costco Wholesale Corporation (Costco) operates membership warehouses and e-commerce sites that offer a selection of nationally branded and private-label products in a wide range of categories. The Company buys the majority of its merchandise directly from suppliers and route it to cross-docking consolidation points (depots) or directly to its warehouses. It operates 891 warehouses, including 614 in the United States and Puerto Rico, 108 in Canada, 40 in Mexico, 35 in Japan, 29 in the United Kingdom, 19 in Korea, 15 in Australia, 14 in Taiwan, seven in China, five in Spain, two in France, and one each in Iceland, New Zealand and Sweden. It also operates e-commerce sites in the United States, Canada, the United Kingdom, Mexico, Korea, Taiwan, Japan and Australia. The Company provides wide selection of merchandise, plus the convenience of specialty departments and exclusive member services.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Costco Faces Challenges with Declining Membership Renewal Rates
- Declining Renewal Rates: Costco's renewal rates have dropped to 92.2% in the U.S. and Canada and 89.7% globally, down 10 basis points from the previous quarter, indicating that the increase in digital memberships is negatively impacting renewals, which could pressure company revenues.
- Membership Income Growth: The company reported membership fee income of $1.329 billion, a 14% year-over-year increase, with the membership fee hike accounting for nearly half of this growth, demonstrating that despite declining renewal rates, the membership base continues to expand.
- Younger Membership Trend: Nearly half of new members are under 40, indicating Costco is attracting more younger, digitally-native consumers; however, this demographic tends to renew at lower rates, increasing future renewal challenges for the company.
- Response Strategy: Costco aims to improve renewal rates by enhancing engagement with digital members, although a slight decline is still anticipated over the next few quarters, yet the company remains optimistic about the initial success of its new communication strategies.
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JPMorgan: Costco to Benefit Most from Tax Season
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- Market Performance Insight: Costco's stock has risen about 15% year-to-date in 2026, recovering from a 6% decline in 2025, indicating strong potential for recovery driven by tax stimulus.
- Consumer Demographic Advantage: With a membership base skewed towards mid- to high-end consumers, analysts believe Costco is well-positioned to attract shoppers during the tax season, especially with its strong performance in big-ticket merchandise.
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- Accelerated Digital Sales: Costco's digitally enabled sales surged 33.1% year-over-year in January, significantly up from 18.3% in December, indicating that the company's efforts to enhance digital engagement are yielding impressive results and improving the online shopping experience for customers.
- Membership Model Advantage: With a high proportion of sales from everyday essentials and a membership model, Costco has attracted consumers even amid market volatility, as evidenced by a 15% year-to-date stock price increase, reflecting investor confidence in its stable business model.
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Costco Faces Challenges with Declining Membership Renewal Rates
- Declining Renewal Rates: Costco's renewal rates have dropped to 92.2% in the U.S. and Canada and 89.7% globally, down 10 basis points from the previous quarter, indicating that the increase in digital memberships is negatively impacting renewals, which could pressure company revenues.
- Membership Income Growth: The company reported membership fee income of $1.329 billion, a 14% year-over-year increase, with the membership fee hike accounting for nearly half of this growth, demonstrating that despite declining renewal rates, the membership base continues to expand.
- Younger Membership Trend: Nearly half of new members are under 40, indicating Costco is attracting more younger, digitally-native consumers; however, this demographic tends to renew at lower rates, increasing future renewal challenges for the company.
- Response Strategy: Costco aims to improve renewal rates by enhancing engagement with digital members, although a slight decline is still anticipated over the next few quarters, yet the company remains optimistic about the initial success of its new communication strategies.
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Walmart Joins Trillion-Dollar Market Cap Club
- New Trillion-Dollar Member: Walmart officially surpassed a $1 trillion market cap on February 3, becoming the 13th publicly traded company globally to reach this milestone, showcasing its strong competitive edge and market influence in the retail sector.
- Tech-Driven Growth: Walmart's push into online shopping and the Walmart+ subscription service led to a 27% increase in global e-commerce sales in the fiscal third quarter, enhancing customer experience and bolstering the company's long-term profitability.
- Potential Industry Leaders: JPMorgan Chase and Visa are seen as the next candidates for the trillion-dollar club, with market caps nearing $864 billion and $636 billion respectively, highlighting the stability and growth potential of the financial sector.
- Economic Cycle Challenges: While Walmart's success is notable, fluctuations in the economic cycle may pose challenges to the growth of JPMorgan Chase and Visa, prompting investors to carefully assess the market environment's impact on financial stocks.
See More
Jennifer Garner's Once Upon a Farm Sees Nearly 20% Increase as IPO Week Concludes
Jennifer Garner's Characters: Garner is known for her roles as Sidney Bristow in Alias and Elektra in Marvel films, where she faced tough adversaries.
Current Challenge: The actress is now dealing with the challenges posed by unpredictable investors in her entrepreneurial ventures.
Entrepreneurial Success: Despite the challenges, Garner appears to be successfully navigating the investment landscape.
Transition from Acting to Business: Garner's shift from acting to entrepreneurship highlights her versatility and determination in facing new challenges.
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Software Stock Slump: The recent decline in software stocks has raised concerns among investors, reflecting broader market volatility.
Bitcoin's Winter Meltdown: Bitcoin continues to experience significant downturns, contributing to a challenging environment for cryptocurrency investors.
Dollar's Ongoing Malaise: The U.S. dollar is facing persistent weakness, impacting global trade and investment strategies.
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JPMorgan: Costco to Benefit Most from Tax Season
- Tax Season Gains: JPMorgan analysts highlight that Costco is poised to benefit the most in the upcoming tax season, as consumers are expected to receive larger refunds, particularly compared to BJ's Wholesale and Walmart's Sam's Club.
- Market Performance Insight: Costco's stock has risen about 15% year-to-date in 2026, recovering from a 6% decline in 2025, indicating strong potential for recovery driven by tax stimulus.
- Consumer Demographic Advantage: With a membership base skewed towards mid- to high-end consumers, analysts believe Costco is well-positioned to attract shoppers during the tax season, especially with its strong performance in big-ticket merchandise.
- Overall Retail Impact: JPMorgan estimates that last year's tax law changes could lead to over a 1% increase in core retail sales in 2026, with the impact being particularly pronounced during the tax refund season, further solidifying Costco's market position.
See More
Costco Reports Strong January Sales Growth
- Significant Sales Growth: Costco's January sales rose 9.3% year-over-year, with same-store sales increasing by 7.1%, demonstrating the company's strong resilience in an uncertain market environment and further solidifying its leadership position in retail.
- Accelerated Digital Sales: Costco's digitally enabled sales surged 33.1% year-over-year in January, significantly up from 18.3% in December, indicating that the company's efforts to enhance digital engagement are yielding impressive results and improving the online shopping experience for customers.
- Membership Model Advantage: With a high proportion of sales from everyday essentials and a membership model, Costco has attracted consumers even amid market volatility, as evidenced by a 15% year-to-date stock price increase, reflecting investor confidence in its stable business model.
- Valuation Risk Warning: Despite Costco's strong business performance, its current price-to-earnings ratio of 53 may already price in expectations for robust earnings growth of 15%, prompting investors to be cautious of valuation risks that could lead to potential losses due to overvaluation.
See More
