Costco (COST) Investor Returns: Long-Term Outperformance and Growth Drivers

Costco's stock has proven remarkably resilient over decades, consistently beating the broader market. Tracking the S&P 500's journey since late 2005 illustrates this dominance. Over twenty years, Costco delivered a total return of nearly 2,500%, far surpassing the S&P 500's 422% return according to StatMuse. This remarkable outperformance underscores the company's enduring strength and investor trust.

The last five years present a slightly more mixed picture, though the long-term trend remains strong. Costco's five-year compound annual growth rate stands at 19.5%, according to FinanceCharts comfortably above the S&P 500's historical average. However, recent market conditions have taken a bite: the stock is currently down 2.6% year-to-date, a notable pullback from its recent highs and multi-year gains. This dip reflects broader market pressures impacting even strong performers.

Despite the near-term weakness, the historical record is compelling. Costco's portfolio of annual returns from 2020 to 2024, ranging between a -19% loss and a 52% gain, ultimately generated that solid 19.5% five-year CAGR. The recent decline serves as a reminder of market volatility, but the company's multi-decade track record of superior returns remains a powerful foundation for its investment thesis.

Looking ahead, this historical outperformance suggests Costco possesses enduring competitive advantages. The next section will examine whether these strengths are translating into tangible operational momentum in the current environment.

Growth Engine Mechanics

Costco's growth engine remains anchored in disciplined, multi-faceted expansion. Fiscal 2025 revenue hit $269.9 billion, up 8.1% year-over-year, driven by strong demand across its warehouse and digital channels. Operating income rose to $10.4 billion, pushing the operating margin to approximately 3.8% from 3.7% the prior year, reflecting improved cost management.

Membership growth is a core pillar, with paid households reaching 79.6 million-a 6.8% increase-supporting $1.24 billion in fee revenue, up 10.4%. E-commerce penetration accounts for 16% of total sales, but momentum has eased. Specifically, Q3 2025 online sales grew only 14.8% year-over-year, a deceleration from earlier highs, highlighting challenges in sustaining digital momentum.

Despite this slowdown, Costco's overall comparable sales rose 6.6% in Q3, underscoring the resilience of its physical locations and membership base. The company's focus on local sourcing and supply chain adjustments has helped mitigate tariff impacts, but the e-commerce deceleration signals a need for renewed innovation in digital engagement. As Costco balances growth and execution, the next section will examine the risks threatening this momentum.

Navigating Headwinds

Costco's current investment case remains anchored in its long-term growth trajectory, yet recent market action highlights emerging headwinds. The retailer faces concrete risk factors requiring acknowledgment, even as its structural advantages persist.

Chief among these is a 23% probability of heightened macroeconomic pressure, specifically citing inflation, tariffs, and currency fluctuations as threats to both demand and margin stability. International exposure compounds this sensitivity, with 31% of its warehouse footprint outside the U.S. facing distinct regulatory, political, and supply chain challenges that could disrupt operations and increase compliance costs. Furthermore, natural disasters, pandemics, or geopolitical events remain potential catalysts for inventory disruption and reduced member traffic, adding layers of operational uncertainty. These risks are not abstract; they manifest in tangible market reactions, as evidenced by Costco's recent underperformance. The trailing twelve months (TTM) return stands at -9.69%, reflecting investor unease that contrasts sharply with its otherwise stellar historical record.

This short-term dip is striking against a backdrop of impressive long-term resilience. Costco delivered a robust 5-year total return of 148.41% through December 2025, significantly outperforming its industry peers over that span. Its 5-year compound annual growth rate (CAGR) of 19.51% notably exceeded the S&P 500's historical average, underpinned by a strong 10-year CAGR of 21.41%. This longevity suggests the core membership model and operational discipline remain potent, even as quarterly volatility introduces near-term friction. The challenge for investors is to weigh these cyclical macro and operational pressures against the enduring strength of Costco's underlying value proposition and its proven ability to navigate economic cycles over the long haul. Balancing the immediate TTM underperformance against this solid multi-year foundation is key to assessing the current entry point.

Forward Scenarios & Catalysts

Looking ahead, Costco's growth trajectory remains compelling but requires a balanced assessment of catalysts and risks. The company's $13.3 billion operating cash flow in fiscal 2025 provides a robust foundation for strategic initiatives like warehouse expansions and digital enhancements. This financial strength supports long-term value creation even as macroeconomic pressures linger.

Membership growth continues to drive momentum. Paid memberships rose 6.8% year-over-year in Q3 2025, with executive memberships surging 9% and membership fees reaching $1.24 billion (up 10.4%) according to Digital Commerce 360. This recurring revenue stream, coupled with margin resilience-operating income climbed to $10.4 billion and the operating margin improved to ~3.8% in fiscal 2025-creates a virtuous cycle for shareholder returns.

E-commerce penetration offers upside potential. Online sales grew 14.8% YoY in Q3 2025 and now represent 16.1% of total revenue, up from 15.6% in 2024. The rollout of buy-now-pay-later options and personalized features could accelerate this trend. International expansion remains a key lever, with overseas operations accounting for 31% of warehouses according to TipRanks. While supply chain adjustments and local sourcing mitigate tariff impacts, regulatory hurdles persist.

However, these bullish scenarios must be weighed against the risk framework. Macroeconomic pressures-including inflation, currency fluctuations, and tariffs-still account for 23% of risk exposure. Competitive intensification and potential disruptions from geopolitical events or pandemics could erode margins despite the improved operating leverage. Execution risks also loom: scaling e-commerce and international growth without straining supply chains or diluting membership value will require disciplined capital allocation.

In synthesis, Costco's forward outlook leans positive, anchored by cash flow strength, membership momentum, and digital transformation. Yet the path to sustained growth hinges on navigating persistent risks. If management maintains margin discipline amid volatility, the valuation upside could materialize. For investors, the key takeaway is selective optimism-monitoring how quickly e-commerce integration and international scaling translate into tangible returns.