What makes Costco special is not simply its low prices, but its membership business model. Customers pay an annual fee for access, giving Costco a recurring revenue stream while encouraging repeat purchases. This creates a powerful combination of customer loyalty, economies of scale and cost advantages.
The numbers support this argument. In FY2025, Costco generated $5.32 billion in membership fee revenue, up 10% year over year. Its renewal rate reached 92.3% in the US and Canada. That is not just customer satisfaction; it is evidence of a business model customers are willing to keep paying for.
However, even an excellent business can become a poor investment if purchased at an excessive valuation.
My takeaway: A strong moat protects future earnings, but the purchase price determines our potential returns. Quality matters, but valuation still matters.
@TigerClub [龇牙]
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