Costco's 5-Year Growth Trajectory: Assessing Market Capture and Scalability

Costco's membership engine is the core of its scalable growth story. The company now serves 81 million total members, a base that has expanded by 39% over the past five years. This isn't just a large customer list; it's a high-margin, recurring revenue stream that funds the entire operation. In fiscal 2025, membership fees generated approximately $5.3 billion in revenue, growing at a double-digit rate. This growth is powered by a near-perfect renewal rate-over 90% globally-and a steady shift toward higher-tier Executive memberships, which drive increased spending per household.

This membership model creates a powerful financial foundation. While the retail side of the business operates on thin margins, membership income is high-margin and predictable. This structural advantage allowed Costco to post a 3.8% operating margin in fiscal 2025, a notable improvement from five years prior. The engine proved resilient even in a challenging 2025, when consumer spending was selective. Members continued to show up and renew, reinforcing the idea that Costco behaves more like a subscription service than a cyclical retailer.

The ultimate growth ceiling, however, is defined by the total addressable market. Here, scale itself is the competitive moat. The "Big Three"-Amazon, Walmart, and Costco-collectively captured an estimated 45% of incremental U.S. retail sales in the second quarter of 2025. This concentration highlights how the largest players are not just growing, but capturing the vast majority of new spending. Their sheer size drives superior bargaining power and the ability to absorb cost pressures, which they reinvest into lower prices and better selection, creating a self-reinforcing flywheel.

The thesis is clear: Costco's membership model is a scalable, high-margin engine. Its 39% five-year member growth and $5.3 billion fee revenue demonstrate the power of its sticky customer base. Yet, the company's ultimate five-year scale depends on its ability to capture a larger share of the global retail TAM. While it already commands a significant slice of incremental U.S. sales, the path to becoming a much larger business in 2030 hinges on expanding that share further, both domestically and internationally, as it continues to open new warehouses.

Geographic Expansion and Operational Efficiency

Costco's growth is no longer just a U.S. story. The company's strategy is clearly shifting toward international markets, where comparable sales are now outpacing the domestic engine. For the five weeks ended January 4, 2026, comparable sales rose 8.4% in Canada and 10.6% in Other International markets, both significantly ahead of the 6% growth seen in the United States. This momentum continued over the first 18 weeks of fiscal 2026, with international segments again leading the charge. The company now operates 290 warehouses outside the United States, spanning major economies from Japan to the UK. The plan is to accelerate this global build-out, with leadership indicating that roughly half of the 30 net new clubs planned for fiscal 2027 and beyond will be located internationally.

This geographic expansion is powered by a razor-sharp operational model. Costco's U.S. warehouses are not just large; they are engineered for extreme efficiency. Each store averages about 147,000 square feet and sells 3-4 times more per square foot than a typical industry store. This high-volume, low-frills format, combined with a lean staffing model, creates a formidable scale advantage. The company's total global footprint of 921 warehouses is concentrated in fewer locations than many competitors, allowing it to maximize sales per site and drive down costs through massive, centralized procurement.

The bottom line is a dual engine for market penetration. Domestically, Costco is deepening its reach in affluent suburban markets, with a strategic focus on saturation. Internationally, it is replicating this proven, efficient model in new countries, where it is already seeing robust demand. This combination of geographic diversification and operational excellence provides a clear path to capturing a larger share of the global retail TAM. By opening about 30 new stores annually and leveraging its scale to drive down costs, Costco is systematically expanding its physical presence while maintaining the high-efficiency model that fuels its growth.

Financial Impact and Competitive Threat Landscape

Costco's growth drivers translate directly into staggering financial scale. In fiscal 2025, the company generated $270 billion in net sales, cementing its position as the world's third-largest retailer. This massive revenue base is not just a headline number; it is the fuel for its entire strategy. The high-margin membership fee stream, which brought in $5.3 billion last year, provides the predictable capital to fund aggressive product pricing. This creates a powerful, defensible moat: Costco can leverage its scale to negotiate lower merchandising costs, which it then passes on to members as lower prices, reinforcing loyalty and driving higher spending per household.

Yet, this scale is also the target. The competitive environment is defined by the "Big Three"-Amazon, Walmart, and Costco-collectively capturing 45% of incremental U.S. retail sales. This concentration means the path to becoming a much larger business in 2030 is narrow, fought on the margins of the industry's fastest-growing segments. The specific threats are evolving. Walmart's recent stock surge, despite similar revenue growth to Costco, highlights a shift in investor focus. The market is now rewarding a "profit flywheel," where high-margin digital advertising and marketplace services are transforming the earnings profile. Costco's model, built on low-margin, high-volume retail, does not yet have this kind of leveraged profit engine.

Amazon, meanwhile, represents a different kind of threat. Its unmatched scale advantage in e-commerce and logistics squeezes out traditional competitors. The "Big Three" flywheel-where scale drives lower prices, which drive more growth, which funds more scale-is most pronounced in online channels. For Costco, the challenge is to replicate its physical efficiency in the digital world while defending its core membership value proposition against rivals that are simultaneously expanding their own high-margin services. The company's financial strength is its moat, but it must now navigate a landscape where the definition of "value" is being redefined by new profit centers.

5-Year Outlook: Catalysts, Risks, and Valuation

The five-year growth trajectory for Costco hinges on one clear catalyst: the successful replication of its U.S. membership model abroad. The company's plan is to open roughly 30 net new warehouses annually, with half of those slated for international markets in fiscal 2027 and beyond. This expansion is already showing promise, with comparable sales rising 8.4% in Canada and 10.6% in Other International markets in recent weeks. The goal is to capture a larger share of the global retail TAM, leveraging its proven, high-efficiency format in new economies. Execution here is paramount; international growth must match the domestic engine's strength to justify the massive capital deployment required.

Yet, the path is not without a steep valuation hurdle. The stock trades at a premium P/E of 51.4, a multiple that demands flawless execution. This price embeds a high degree of confidence that growth will consistently exceed even optimistic Wall Street estimates, which project a 7.4% compound annual revenue growth rate through fiscal 2028. Any stumble in the expansion plan, or a slowdown in member growth or spending, could pressure this multiple. The market is not rewarding past performance but future dominance, leaving little room for error.

The overarching risk is the competitive environment itself. Costco operates within the "Big Three" flywheel, where scale is the ultimate moat. While this concentration means the company captures a significant slice of new spending, it also means the battle for market share is fought against two equally massive, entrenched rivals. The competitive landscape is shifting, with investors now rewarding a "profit flywheel" driven by high-margin digital services. Costco's low-margin, high-volume retail model does not yet have this leveraged profit engine, creating a potential vulnerability if the definition of value continues to evolve.

The bottom line for the 2030 thesis is one of scalable execution against a premium. The catalyst is clear-international expansion must work. The risk is that the stock's valuation already prices perfection. In a retail world where the "Big Three" are collectively capturing 45% of incremental U.S. sales, Costco's next five years will be defined by its ability to grow its own slice of that pie, faster than the market expects.