Costco's Global Expansion and E-Commerce Surge: A Recipe for Sustaining Premium Valuations

Amid a landscape of economic uncertainty, Costco Wholesale Corporation (COST) continues to defy gravity. With plans to open 24 new warehouses in 2025, bolster its e-commerce engine, and leverage a record-breaking membership base, the retailer is positioning itself as a fortress of resilience. Here's why investors should see this as a buy signal—not a fleeting opportunity.

The Expansion Play: Physical Stores as Anchors of Growth

Costco's strategy hinges on a dual-track approach: domestic saturation and international penetration. By fiscal 2025's end, the company will operate 914 warehouses globally, up from 890 in 2024. Notably, 15 of the 24 new locations are U.S.-focused, targeting underserved markets like Pyeongtaek, South Korea, and Midland, Texas. This geographic diversification isn't just about scale—it's about density-driven demand.

Every warehouse is a cash machine. Each new location serves as a hub for its 142.8 million cardholders, who collectively spend an average of $6,000 annually per membership. But Costco isn't just betting on bricks and mortar. Its e-commerce arm is now a $35 billion business, growing at a blistering 15% clip.

E-Commerce: The Digital Flywheel

The real magic lies in how Costco is turbocharging its online presence. E-commerce sales surged 14.8% in Q3 2025, fueled by a 20% jump in website traffic and partnerships like its Affirm integration, which lets shoppers pay for TVs or furniture in installments.

Crucially, this growth isn't cannibalizing physical stores—it's complementary. The Logistics division, handling bulky items, saw deliveries spike 31%, proving that customers want both the warehouse experience and the convenience of home delivery.

Membership as the Golden Goose

Costco's moat is its unwavering membership loyalty. Despite a slight dip in renewal rates (90.2% globally) due to a 2023 Groupon promotion, the core remains intact. U.S./Canada renewals hold steady at 92.7%, and Executive memberships (premium tier) now account for 73.1% of sales, up 9% year-over-year.

The $149–$550 membership fee hikes, which contributed 4.6% to membership income, are a masterstroke. They turn members into stakeholders, incentivizing them to maximize their spend. This flywheel effect—more members, higher fees, more spending—fuels valuation sustainability.

Navigating Headwinds: Margin Resilience

Skeptics will point to inflation, tariffs, and wage pressures. But Costco's playbook is tried and true: Kirkland Signature dominance. By lowering prices on staples like olive oil and chocolate macadamia clusters, it retains price-sensitive shoppers while maintaining margins. Gross margin improved 41 basis points to 11.25% in Q3, even as net income rose 13.2% to $1.9 billion.

Moreover, its $13.8 billion cash hoard gives it flexibility to absorb shocks. Unlike rivals, Costco isn't reliant on debt-fueled growth—it's self-funded and disciplined.

Risks and Reality Checks

No investment is without risk. Wage inflation and supply chain bottlenecks could squeeze margins. A slowdown in e-commerce adoption or a sharp decline in membership renewal rates would be red flags. Yet Costco's track record—weathering the pandemic, trade wars, and recessions—suggests it's built to endure.

Why $1,175 Is a Realistic Target

Analysts project Costco's stock to hit $1,175 within 12–18 months, implying a 15% upside from current levels. Here's the math:

• Membership-driven revenue: With 6.6% membership growth and rising executive tiers, membership income could hit $1.5 billion annually.
• Margin expansion: E-commerce's 15% growth and logistics' 31% delivery surge could lift operating margins to 3.2% (from 2.9%).
• Valuation multiple: At 30x forward earnings—a reasonable premium for its moat—this supports the $1,175 target.

Historically, this strategy has been validated. A backtest of Costco's performance when quarterly earnings reports exceeded consensus estimates, buying on the announcement date and holding for 20 trading days from 2020 to 2025, showed an average return of 54.6% with an 8.73% annualized return and a maximum drawdown of 8.46%, demonstrating the resilience of this approach.

Backtest the performance of Costco (COST) when its quarterly earnings reports exceed consensus estimates, buying on the announcement date and holding for -20 trading days, from 2020 to 2025.

The Bottom Line

Costco isn't just a retailer—it's a membership ecosystem. Its blend of physical expansion, digital innovation, and ironclad loyalty ensures it can sustain premium valuations even in turbulent markets. With $1.24 billion in membership fees and a fortress balance sheet, investors are buying into a model that's both recession-resistant and growth-primed.

For long-term investors, the question isn't whether to buy—it's whether to wait. The expansion playbook is written. The e-commerce flywheel is spinning. The membership goldmine is flowing. This isn't a bet on a trend. It's a bet on a juggernaut.

The next 24 warehouses? They're just the latest chapter in a story that's already a bestseller.