Costco: Still Worth the Membership Fee?

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Costco. It’s a peculiar place, isn’t it? A warehouse brimming with everything from industrial-sized jars of mayonnaise to reasonably priced televisions. And, for a surprisingly long time, a rather sensible investment. It’s outperformed the S&P 500 for years, which, let’s be honest, is a bit like consistently winning at a game where most people are actively trying to lose. Last year, though, it had a bit of a wobble. A mere blip, really, but enough to make one wonder if the magic was fading. Now, in early 2026, it’s suddenly taken off again, up a respectable 13% in January. The question, of course, is whether it’s still a good time to join the club – the investment club, that is.

The Evergreen Membership Model

The brilliance of Costco, and it is brilliant, lies in its membership fees. It’s a subscription service for…everything. People willingly hand over money just for the privilege of shopping there. And they keep renewing. At a rate of 92.2% in the US and Canada, and 89.7% worldwide! That’s a loyalty level most companies only dream of. It’s a bit like a really good book club, except instead of discussing literature, you’re discussing the merits of various bulk cheeses. In the first quarter of their 2026 fiscal year, sales were up 8.2%, and earnings per share jumped to $4.50. Not bad for a place that seems perpetually crowded.

They’re adapting, too. Self-checkout lanes, online renewals…sensible things. The traditional warehouse model isn’t exactly suited to online shopping – trying to ship a pallet of paper towels isn’t easy – but they’ve partnered with Instacart for grocery delivery and are expanding curbside pickup. It’s a smart move, acknowledging that even the most dedicated Costco member occasionally wants to avoid the in-store scrum.

Costco is one of the few companies that provides monthly sales updates, and the December results were apparently impressive enough to send the stock price soaring. An 8.5% increase in sales year-over-year is nothing to sniff at, even if it does mean more people are buying enormous tubs of pretzels.

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Costco Stock: Priced for Perfection?

Costco has always been a bit expensive. Investors are willing to pay a premium for its reliable growth, and for a long time, that premium seemed justified. But last year, the P/E ratio climbed above 60. That’s…ambitious. It’s the sort of valuation that makes you wonder if everyone’s forgotten that even the best companies can have a bad quarter. The market, wisely, seemed to agree, and the stock dipped a little.

Now it’s creeping back up, trading at 52 times trailing-12-month earnings. Still pricey, frankly. It’s a bit like buying a really nice antique – you appreciate the quality, but you can’t help but wonder if you’re paying a bit too much for the provenance. Despite all its wonderful qualities, it’s starting to look…fully valued.

If you’re thinking of buying, a dollar-cost averaging strategy might be sensible. Buy a little now, a little later, and benefit from any potential dips. Costco is likely to reward investors over the long term, but it’s unlikely to deliver those outsized gains it has in the past. It’s a solid, reliable investment, but perhaps not the explosive growth stock it once was. And that, in the grand scheme of things, is probably a good thing.

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2026-02-01 07:53