Costco
The membership warehouse model, Ongoing
Prices we believe are consistently lower than elsewhere
The membership warehouse model
Costco sold $297.2 billion in the year to 30 August 2026, up 10.1%, on gross margins of about 11%. It can do that because it sells a few thousand items in volume and charges $65 a year to shop. Membership fees were $5.9 billion, more than the $5.8 billion left after paying for the goods and the warehouses. Its plan is to keep prices low, keep members renewing, and open more warehouses.
Low prices, limited selection
Offer low prices on a limited selection of nationally-branded and private-label products, to produce high sales volumes and rapid inventory turnover.
Limit most items to fast-selling models, sizes, and colors, with fewer than 4,000 active SKUs in a warehouse.
Keep members’ perception of “pricing authority”, rather than maximise prices in the short term.
Costco earns more from membership fees than from selling goods
Costco operates at gross margins near 11%, so almost every dollar goes back out as the cost of the goods or the cost of running the warehouses. Membership fees are added on top, and Costco calls the membership format integral to its profitability.
Fees were $1.99 for every hundred dollars of sales, and 51% of operating income.
Each line is a share of net sales, worked out from the income statement. Net sales were $297.2 billion in fiscal 2026.
Member sales
Fiscal 2026
- Merchandise costs$88.91
- Selling, general, and administrative$9.15
- Left after goods and running costs$1.94
- Membership fees, added on top$1.99
92.2% of members renew in the U.S. and Canada
Costco says its profitability depends on how many members it has, how many are Executive members, and how many renew. One card is a million paid members.
- Paid members
- 81.0m
- Executive members
- 38.7m
- Renewal, U.S. and Canada, and worldwide
- 92.3%, 89.8%
Paid members are at the end of each fiscal year.
Renewal rates at the end of the third quarter of fiscal 2026, when 82.9 million members paid.
939 warehouses in 14 countries
Costco opened 16 warehouses in the first 36 weeks of fiscal 2026, two of them relocations, and planned 13 more before the year ended. It expects square footage to grow faster in many foreign markets, where its base is smaller.
939
warehouses in September 202625 more than in August 2025
- United States and Puerto Rico
- 647
- Canada
- 115
- Mexico
- 43
- Japan
- 37
- United Kingdom
- 29
- Korea
- 20
- Australia
- 15
- Taiwan
- 14
- China
- 7
- Spain
- 5
- France
- 3
- Sweden
- 2
- Iceland
- 1
- New Zealand
- 1
Warehouses by country in September 2026.
Say what you will not do.
Costco says it does not focus in the short term on maximizing the prices it charges, and that its pricing investments may include holding prices steady despite cost increases, at a cost to gross margin in the near term. We recommend writing down the tempting thing your plan rules out, so that a hard quarter is not the moment someone reopens the question.
Let one fee carry the risk.
Membership fees of $5.9 billion were slightly more than the $5.8 billion left after merchandise costs and running costs, so the fee lets Costco price goods close to cost. We recommend finding the one steady income your plan can lean on, and measuring it, in Costco’s case renewals, more closely than the rest.
Report the number that could flatter you.
Costco gives comparable sales with and without gasoline prices and exchange rates, 8.4% and 6.6% for the year, and the fourth quarter’s profit with and without a $0.15 a share tariff refund. We recommend showing the adjusted figure beside the headline every time, so a good number is never one that needs explaining later.
Sources
- 1. Costco Wholesale Corporation (2026). Costco Wholesale Corporation reports fourth quarter and fiscal year 2026 operating results. News release, Form 8-K exhibit 99.1, 24 September 2026. sec.gov
- 2. Costco Wholesale Corporation (2026). Quarterly report on Form 10-Q for the quarter ended 10 May 2026. U.S. Securities and Exchange Commission, May 2026. sec.gov
- 3. Costco Wholesale Corporation (2025). Annual report on Form 10-K for the fiscal year ended 31 August 2025. U.S. Securities and Exchange Commission, 8 October 2025. sec.gov
Headwater is not connected with Costco Wholesale Corporation. Costco, Kirkland Signature, and Executive Member are trade marks of their owners. Updated 28 September 2026.