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Back of Napkin

Costco Wholesale Corporation COST

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Costco's comparable sales accelerated from 6.8% to 9.8% over six quarters. Over the same six quarters the number of people walking through the door decelerated from 5.7% to 2.4%.

The entire acceleration is basket size, and the renewal rate has slipped in every single one of those quarters.

COST · price with moving averages

Daily · 6MWeekly · 3Y
$477$637$796$956$1116 Sep '23Apr '24Nov '24Jun '25Jan '26Aug '26 BID
EMAs82140

Source: market data.

The business

Costco sells a deliberately small number of items in large packages out of 931 warehouses, at a gross margin near 11%, and makes most of its actual profit on the annual fee members pay for the privilege of shopping there. That is the whole model: give away the merchandise margin, keep the subscription. Executive members, who pay more and get cash back, are now 75.0% of sales.

The renewal rate is therefore not a statistic about customer service. It is the single number that says whether the business still works.

Inside the complete Back of Napkin

  1. 01The business
  2. 02The numbers
  3. 03Management
  4. 04How it fails or surprises you
  5. 05The shape of the payoff
  6. 06Closing thoughts
  7. 07Methodology

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