Costco

Costco's international segment, particularly Korea and Japan, is criminally underappreciated — sales per warehouse in those markets are among the highest in the entire fleet. The Japan business has been profitable for years and Korean locations routinely top global sales rankings. As they add more international locations the segment mix shift is a multi-year earnings tailwind that the market isn't fully pricing.

Costco's membership fee income is essentially a recurring annuity at this point — renewal rates just hit 93% in the US and Canada, which is basically unheard of in retail. The fee hike they pushed through last year is still being absorbed and hasn't dented renewals at all. When your customers are literally paying you for the privilege of shopping, the moat is real.

Costco's latest earnings showed ancillary business revenue — which includes pharmacy, optical, hearing aids, and the food court — growing faster than core merchandise. The $1.50 hot dog and soda combo price has been held since 1985, which has become almost a brand promise the company treats as untouchable. Pharmacy in particular is benefiting from GLP-1 drug demand as members use Costco's pharmacy for competitive pricing on compounded alternatives.

Costco opened its first retail location in China's mainland Shenzhen market and the footage of the opening day crowds looked identical to the Shanghai store launch chaos in 2019. International expansion is accelerating with new locations also confirmed in Spain and New Zealand this fiscal year. The company now operates over 870 warehouses globally.

Costco's food and sundries segment is getting squeezed by inflation normalization — when prices were rising they looked like heroes on unit economics but now that deflation is hitting some categories the comp story gets harder. CFO Gary Millerchap has been pretty candid that traffic is doing the heavy lifting while ticket growth is slowing. Comps in the 5-6% range don't support this multiple.

Interesting that Costco keeps resisting the advertising revenue model that Target, Walmart, and Amazon have all leaned into heavily. Their first-party purchase data on high-income members would command serious CPMs from consumer brands. They've done some limited supplier programs but nothing close to what peers are building. Wonder if that's a deliberate culture decision or just slow execution.

Does anyone have a view on how Costco's e-commerce segment actually fits into the long-term story? Online was up around 20% last quarter but it's still a small slice of total revenue and their fulfillment cost structure for big-ticket items seems messy. Is digital ever going to be meaningful or is this fundamentally always a physical-first business?

How exposed is Costco to tariff risk on the electronics and apparel categories given how much sourcing runs through Southeast Asia and China? They don't break out sourcing geography in any useful way in the filings. Has anyone done work on what a 25% tariff environment does to their gross margin in those categories?

Costco's gasoline business is an absolute membership retention weapon — members save anywhere from 20 to 40 cents per gallon versus street prices near most locations. That fuel savings alone can justify the annual membership fee for a family with two cars. It's a silent loyalty driver that doesn't show up clearly in the financials but absolutely shows up in renewal rates.

The Kirkland Signature private label is doing something most retailers can't replicate — it's actually aspirational. Their Kirkland olive oil, coffee, and especially the rotisserie chicken have genuine cult followings that drive basket trips on their own. Private label margins are typically 30-40% higher than national brands and Kirkland is now over 30% of total sales.

Trading at 55x forward earnings for a warehouse retailer with single-digit comps growth is genuinely hard to justify. Sam's Club is quietly gaining share with better digital integration and Walmart's logistics infrastructure behind it. Costco's valuation prices in perfection for the next decade.