Costco Membership Income Jumps Double Digits: What Is Driving Growth?

Costco Wholesale Corporation COST has reported a significant surge in its primary profit engine, with membership fee income jumping 13.6% to $1,355 million in the second quarter of fiscal 2026. This double-digit growth reflects a highly resilient business model that thrives on member loyalty even during periods of economic volatility. The increase is primarily attributed to a strategic blend of higher membership rates and a growing global member base.

The impact of the membership fee hike implemented in September 2024 is now fully reflected in the financial results, accounting for roughly one-third of membership income growth. Excluding the fee hike and foreign exchange impacts, membership income grew 7.5% year over year. This was driven by membership growth and executive membership upgrades.

Costco ended the quarter with 82.1 million paid household members, up 4.8% from the prior-year period, while total cardholders increased 4.7% to 147.2 million. Executive memberships rose 9.5% to 40.4 million, reflecting strong member engagement and upgrades. These members not only pay higher fees but also account for roughly 75.8% of worldwide sales.

To stimulate this growth, Costco has enhanced the executive package with perks such as a monthly $10 Instacart credit and improved warehouse accessibility through extended hours. Management is also successfully navigating a shift toward digital sign-ups by implementing targeted communication and retention strategies to support renewal rates. Renewal rate remains an impressive 92.1% in the United States and Canada and 89.7% worldwide.

Global expansion also plays a pivotal role in this upward trajectory. With 924 warehouses currently operating and plans to open 28 net new locations in fiscal 2026, the company continues to capture new households. This expanding physical footprint, combined with a 22.6% surge in digitally-enabled comparable sales, ensures a steady influx of new sign-ups that bolsters the recurring fee revenues.

Costco Peers – Walmart & BJ’s Wholesale Membership Growth

Walmart Inc. WMT is also witnessing solid momentum in membership-led income streams. The company reported a 15.1% rise in global membership fee revenues during the fourth quarter of fiscal 2026, supported by strong growth in Walmart+ subscriptions and Sam’s Club memberships. Walmart continues to leverage its omnichannel ecosystem, combining digital engagement, fast delivery and advertising, to drive higher member value and recurring income streams.

Meanwhile, BJ's Wholesale Club Holdings, Inc. BJ is delivering even stronger gains in membership income, closely mirroring Costco’s trend. BJ’s Wholesale reported a 10.9% increase in membership fee income to $129.8 million in the final quarter of fiscal 2025, driven by higher member acquisition, retention and premium tier penetration. With a 90% renewal rate and growing digital engagement, BJ’s Wholesale continues to enhance member loyalty and lifetime value.

What the Latest Metrics Say About Costco

Costco has seen its shares jump 7.2% in the past year compared with the industry’s growth of 20.1%.

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From a valuation standpoint, Costco's forward 12-month price-to-earnings ratio stands at 45.58, higher than the industry’s ratio of 32.05 but below its median level of 47.49. Although the premium multiple may appear elevated, investors often view Costco as a high-quality retail operator supported by resilient comparable sales growth, strong membership retention and expanding digital capabilities.

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The Zacks Consensus Estimate for Costco’s current financial-year sales and earnings per share implies year-over-year growth of 8.3% and 12.9%, respectively. For the next fiscal year, the consensus estimate indicates a 7.3% rise in sales and 9.8% growth in earnings.

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Costco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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