Costco Wholesale Corporation (COST): A Bull Case Theory

We came across a bullish thesis on Costco Wholesale Corporation on LongYield’s Substack. In this article, we will summarize the bulls’ thesis on COST. Costco Wholesale Corporation’s share was trading at $970.33 as of July 11^th. COST’s trailing and forward P/E were 55.04 and 47.85 respectively according to Yahoo Finance.

Costco Wholesale Corporation delivered a robust Q3 FY25 performance, with net sales rising 8.0% to $61.96 billion and net income up 13.2% to $1.903 billion, underscoring its ability to thrive amid macroeconomic challenges. Its core strength remains its membership model, which generated $1.24 billion in fees—a 10.4% increase—driven by high renewal rates (92.7% in the U.S. and Canada) and a 6.8% rise in paid household members to 79.6 million.

Executive members, now 37.6 million strong, accounted for 73.1% of sales. Costco opened nine new warehouses in Q3 and plans ten more in Q4, reaching 914 locations globally by year-end. Its e-commerce segment surged 14.8%, supported by increased traffic, higher order values, and enhanced logistics. Strategic partnerships, like with Affirm, and technology pilots further strengthen its digital presence.

Despite inflation and tariffs, Costco maintained its value proposition by absorbing costs and lowering prices on key items, contrasting with peers like Walmart and Target, who passed costs to consumers. Kirkland Signature continued to gain traction, and private label strength supported margins. Gross margin expanded by 41 basis points to 11.25%, aided by lower commodity costs, while net income remained resilient despite a $130 million LIFO charge.

Costco’s tariff mitigation strategy—rerouting supply chains, increasing local sourcing, and delaying price hikes—reinforces its member-first philosophy. Compared to competitors, Costco outperformed on both sales growth and pricing discipline. Management remains confident in its long-term outlook, with continued investment in physical expansion, digital capabilities, and membership engagement, making Costco a standout in a volatile global retail landscape.

Previously we covered a bullish thesis on Costco Wholesale Corporation (COST) by Sanjiv in June 2025, which highlighted its member-first strategy, pricing discipline, and compounding history, though flagged valuation concerns. The stock has depreciated approximately by 7.7% since our coverage. The thesis still stands given Costco’s operational strength. LongYield shares a similar view but emphasizes macro resilience and pricing power.

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Disclosure: None.