Costco Membership Growth Slows, Raising Investor Concerns
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 2 hours ago
0mins
Source: CNBC
- Membership Growth Slowdown: Costco's paid membership growth rate has dropped to 4.8% over the past year, below the historical mid- to high-single-digit range of 6%-7%, raising investor concerns as high-margin membership fee income is crucial for the company's performance.
- Declining Renewal Rates: Renewal rates fell by 30 basis points in Q3 of fiscal 2025 and another 40 basis points in the following quarter, although the declines moderated in early fiscal 2026, the overall renewal rate remains below 90%, potentially impacting long-term profitability.
- Impact of Digital Transformation: The share of younger digital members has surged from 5% in 2019 to nearly 50%, which, while boosting membership revenue, has led to lower renewal rates for these new members, highlighting challenges in attracting long-term loyal customers for Costco.
- Market Environment Pressures: As lower-income consumers become more cautious with spending, the slowdown in membership growth is evident; although high gas prices may enhance membership appeal, fewer new warehouse openings limit growth potential in international markets, posing challenges for Costco's overall business.
Trade with 70% Backtested Accuracy
Stop guessing "Should I Buy COST?" and start using high-conviction signals backed by rigorous historical data.
Sign up today to access powerful investing tools and make smarter, data-driven decisions.
Analyst Views on COST
Wall Street analysts forecast COST stock price to rise
24 Analyst Rating
19 Buy
4 Hold
1 Sell
Strong Buy
Current: 1003.690
Low
769.00
Averages
1061
High
1205
Current: 1003.690
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 Q3 Earnings Preview: Strong Estimates Ahead
- Earnings Release Date: Costco is set to announce its Q3 earnings on May 28, which is expected to draw significant investor attention, particularly in the current economic climate.
- Earnings Forecast: Analysts predict earnings of $4.92 per share, indicating the company's continued strong performance in profitability, which may further bolster market confidence in its stock.
- Revenue Expectations: The anticipated revenue of $69.42 billion for Q3 reflects the stability of consumer demand and the company's competitive position in the retail market.
- Historical Performance: Costco has beaten earnings estimates in 6 out of the last 8 quarters, demonstrating its robust performance and management capabilities in the market, which could have a positive impact on its stock price.
See More
Costco Membership Growth Slows, Raising Investor Concerns
- Membership Growth Slowdown: Costco's paid membership growth rate has dropped to 4.8% over the past year, below the historical mid- to high-single-digit range of 6%-7%, raising investor concerns as high-margin membership fee income is crucial for the company's performance.
- Declining Renewal Rates: Renewal rates fell by 30 basis points in Q3 of fiscal 2025 and another 40 basis points in the following quarter, although the declines moderated in early fiscal 2026, the overall renewal rate remains below 90%, potentially impacting long-term profitability.
- Impact of Digital Transformation: The share of younger digital members has surged from 5% in 2019 to nearly 50%, which, while boosting membership revenue, has led to lower renewal rates for these new members, highlighting challenges in attracting long-term loyal customers for Costco.
- Market Environment Pressures: As lower-income consumers become more cautious with spending, the slowdown in membership growth is evident; although high gas prices may enhance membership appeal, fewer new warehouse openings limit growth potential in international markets, posing challenges for Costco's overall business.
See More
Major Earnings Reports Expected After Thursday's Close
- Major Earnings Reports: After Thursday's close, key companies including Costco Wholesale Corporation (COST), Dell Technologies (DELL), Okta (OKTA), and UiPath (PATH) are set to release their earnings, which are expected to impact market dynamics.
- Additional Earnings Releases: In addition to the aforementioned companies, several others such as ADSK, AEO, AMBA, ASAN, ESTC, GAP, HQY, MDB, NGL, NTAP, PD, UVV, and VSAT will also report earnings, indicating a busy earnings season.
- Market Reaction Anticipation: Investors are likely to closely monitor these earnings reports to assess the performance of these companies in the current economic climate, which could influence market sentiment and stock price fluctuations.
- Earnings Season Calendar: Seeking Alpha provides a comprehensive earnings season calendar, assisting investors in tracking upcoming earnings releases to ensure they do not miss critical information.
See More
Retail Earnings and Inflation Data Preview
- Retail Earnings Preview: Tomorrow, earnings reports from major retailers including Dollar Tree, Best Buy, Kohl's, and Costco are expected, with Costco projected to achieve low double-digit revenue growth driven by rising gas prices and increased traffic, although there are concerns that consumers may shift spending back to essentials.
- Tech Earnings: Dell is set to report its first-quarter earnings on Thursday, with sky-high expectations following a more than 100% stock price increase over the past three months, and analysts are looking for strong AI server momentum, projecting server sales around $13 billion for the quarter.
- Inflation Data Release: The Personal Consumption Expenditures (PCE) data will be released on Thursday, with forecasts indicating a 0.5% increase in April, down from March's figure, while core PCE is expected to remain steady, making this data crucial for market sentiment and investment decisions.
- Fed Officials' Commentary: Investors will be closely watching the latest comments from multiple Fed presidents for clues on the direction of interest rates as summer approaches, which will significantly influence market expectations regarding future monetary policy.
See More
Jim Cramer Recommends Four Stocks for New Investors
- Diversification Strategy: Jim Cramer emphasized the need for diversification even as artificial intelligence dominates the market, ensuring long-term stability in investment portfolios to mitigate risks associated with single-theme investments.
- Stock Recommendations: Cramer recommended four stocks for new members to buy, including Alphabet, Amazon, Apple, and Nvidia, all of which demonstrate strong growth potential, particularly in their AI-related businesses.
- Market Outlook: Despite challenges faced by Meta and Microsoft, Cramer remains cautiously optimistic about their future performance, suggesting that these companies could achieve breakthroughs in the evolving AI landscape.
- Emerging Investment Opportunities: Stocks like Arm Holdings and Broadcom are showing strong performance, particularly in the data center and AI chip sectors, reflecting robust market demand for related technologies, making them worth watching for long-term growth potential.
See More
First Quarter Earnings Strong, Market Outlook Optimistic
- Earnings Season Success: The first quarter earnings reports revealed a remarkable 29% year-over-year growth in corporate profits, significantly surpassing the expected 12%, with 83% of companies beating market expectations, indicating a robust economic recovery that could boost investor confidence.
- Market Outlook Caution: Despite the stellar performance in Q1, analysts caution that rising oil prices and interest rates may pressure future earnings growth, particularly in a midterm election year where market volatility could increase, necessitating a cautious approach from investors.
- Opportunities in Small Caps: Small-cap stocks have performed well amid economic recovery, particularly driven by a resurgence in manufacturing, and if this momentum continues, it could present new growth opportunities for investors, especially given the uncertainty surrounding interest rate policies.
- Sector Investment Recommendations: Analysts suggest focusing on underperforming sectors such as healthcare, financials, and basic materials, as these areas may offer undervalued investment opportunities, appealing to long-term investors seeking value amidst market fluctuations.
See More
Costco Q3 Earnings Preview: Strong Estimates Ahead
- Earnings Release Date: Costco is set to announce its Q3 earnings on May 28, which is expected to draw significant investor attention, particularly in the current economic climate.
- Earnings Forecast: Analysts predict earnings of $4.92 per share, indicating the company's continued strong performance in profitability, which may further bolster market confidence in its stock.
- Revenue Expectations: The anticipated revenue of $69.42 billion for Q3 reflects the stability of consumer demand and the company's competitive position in the retail market.
- Historical Performance: Costco has beaten earnings estimates in 6 out of the last 8 quarters, demonstrating its robust performance and management capabilities in the market, which could have a positive impact on its stock price.
See More
Costco Membership Growth Slows, Raising Investor Concerns
- Membership Growth Slowdown: Costco's paid membership growth rate has dropped to 4.8% over the past year, below the historical mid- to high-single-digit range of 6%-7%, raising investor concerns as high-margin membership fee income is crucial for the company's performance.
- Declining Renewal Rates: Renewal rates fell by 30 basis points in Q3 of fiscal 2025 and another 40 basis points in the following quarter, although the declines moderated in early fiscal 2026, the overall renewal rate remains below 90%, potentially impacting long-term profitability.
- Impact of Digital Transformation: The share of younger digital members has surged from 5% in 2019 to nearly 50%, which, while boosting membership revenue, has led to lower renewal rates for these new members, highlighting challenges in attracting long-term loyal customers for Costco.
- Market Environment Pressures: As lower-income consumers become more cautious with spending, the slowdown in membership growth is evident; although high gas prices may enhance membership appeal, fewer new warehouse openings limit growth potential in international markets, posing challenges for Costco's overall business.
See More
Major Earnings Reports Expected After Thursday's Close
- Major Earnings Reports: After Thursday's close, key companies including Costco Wholesale Corporation (COST), Dell Technologies (DELL), Okta (OKTA), and UiPath (PATH) are set to release their earnings, which are expected to impact market dynamics.
- Additional Earnings Releases: In addition to the aforementioned companies, several others such as ADSK, AEO, AMBA, ASAN, ESTC, GAP, HQY, MDB, NGL, NTAP, PD, UVV, and VSAT will also report earnings, indicating a busy earnings season.
- Market Reaction Anticipation: Investors are likely to closely monitor these earnings reports to assess the performance of these companies in the current economic climate, which could influence market sentiment and stock price fluctuations.
- Earnings Season Calendar: Seeking Alpha provides a comprehensive earnings season calendar, assisting investors in tracking upcoming earnings releases to ensure they do not miss critical information.
See More
Retail Earnings and Inflation Data Preview
- Retail Earnings Preview: Tomorrow, earnings reports from major retailers including Dollar Tree, Best Buy, Kohl's, and Costco are expected, with Costco projected to achieve low double-digit revenue growth driven by rising gas prices and increased traffic, although there are concerns that consumers may shift spending back to essentials.
- Tech Earnings: Dell is set to report its first-quarter earnings on Thursday, with sky-high expectations following a more than 100% stock price increase over the past three months, and analysts are looking for strong AI server momentum, projecting server sales around $13 billion for the quarter.
- Inflation Data Release: The Personal Consumption Expenditures (PCE) data will be released on Thursday, with forecasts indicating a 0.5% increase in April, down from March's figure, while core PCE is expected to remain steady, making this data crucial for market sentiment and investment decisions.
- Fed Officials' Commentary: Investors will be closely watching the latest comments from multiple Fed presidents for clues on the direction of interest rates as summer approaches, which will significantly influence market expectations regarding future monetary policy.
See More
Jim Cramer Recommends Four Stocks for New Investors
- Diversification Strategy: Jim Cramer emphasized the need for diversification even as artificial intelligence dominates the market, ensuring long-term stability in investment portfolios to mitigate risks associated with single-theme investments.
- Stock Recommendations: Cramer recommended four stocks for new members to buy, including Alphabet, Amazon, Apple, and Nvidia, all of which demonstrate strong growth potential, particularly in their AI-related businesses.
- Market Outlook: Despite challenges faced by Meta and Microsoft, Cramer remains cautiously optimistic about their future performance, suggesting that these companies could achieve breakthroughs in the evolving AI landscape.
- Emerging Investment Opportunities: Stocks like Arm Holdings and Broadcom are showing strong performance, particularly in the data center and AI chip sectors, reflecting robust market demand for related technologies, making them worth watching for long-term growth potential.
See More
First Quarter Earnings Strong, Market Outlook Optimistic
- Earnings Season Success: The first quarter earnings reports revealed a remarkable 29% year-over-year growth in corporate profits, significantly surpassing the expected 12%, with 83% of companies beating market expectations, indicating a robust economic recovery that could boost investor confidence.
- Market Outlook Caution: Despite the stellar performance in Q1, analysts caution that rising oil prices and interest rates may pressure future earnings growth, particularly in a midterm election year where market volatility could increase, necessitating a cautious approach from investors.
- Opportunities in Small Caps: Small-cap stocks have performed well amid economic recovery, particularly driven by a resurgence in manufacturing, and if this momentum continues, it could present new growth opportunities for investors, especially given the uncertainty surrounding interest rate policies.
- Sector Investment Recommendations: Analysts suggest focusing on underperforming sectors such as healthcare, financials, and basic materials, as these areas may offer undervalued investment opportunities, appealing to long-term investors seeking value amidst market fluctuations.
See More
