Costco generated $134.2 billion in net sales during the first half of fiscal 2026, an 8.7% increase over the same period last year. The company now operates 924 warehouses across 14 countries, holds 81 million paid member accounts, and reported e-commerce growth of 22.6% in its most recent quarter. This SWOT analysis of Costco breaks down the strengths, weaknesses, opportunities, and threats facing the third-largest retailer in the world heading into the back half of 2026.
Costco SWOT Analysis – TLDR
- Costco’s fiscal 2025 revenue reached $275.2 billion, with fiscal 2026 tracking toward $300 billion based on first-half results.
- Kirkland Signature, Costco’s private-label brand, generated $90 billion in sales in 2025 and accounts for roughly a third of total revenue.
- The SWOT analysis of Costco reveals a 92.3% membership renewal rate in the U.S. and Canada, with 40.4 million Executive Members driving 75.8% of all sales.
- Costco plans to open 28 new warehouses in fiscal 2026 and targets 30+ per year going forward, backed by $6.5 billion in capital spending.
- Strengths of Costco include its e-commerce arm growing at triple the rate of comparable store sales, with online sales up 22.6% in Q2 2026.
Strengths
Membership Loyalty and Predictable Income
Costco ended fiscal 2025 with 81 million paid member accounts and 145.2 million total cardholders. The U.S.-Canada renewal rate was 92.3%, and the global rate sat at roughly 90%. Membership fee income climbed 14% in Q4 2025 alone, reaching $1.72 billion for the quarter. This recurring revenue stream funds low product markups and buffers against margin pressure.
Kirkland Signature as a Profit Engine
Kirkland Signature generated $90 billion in sales in 2025, up $15 billion from 2024. The brand covers over 600 products globally and accounts for about a third of Costco’s total sales. Kirkland items sell at 20-40% below competing national brands while carrying margins up to 15%, compared to the 14% cap Costco Wholesale applies to branded goods. CEO Ron Vachris personally signs off on every new Kirkland product addition.
Employee Compensation Advantage
Costco’s average hourly wage exceeded $31 in the U.S. and Canada as of March 2025, with a $20 per hour company minimum. The retailer employs about 341,000 people and maintains one of the lowest turnover rates in retail. A 2025 Teamsters contract secured a 22% increase in pension contributions. Walmart associates average $14-$16 per hour, and Sam’s Club pays $14-$18 per hour for comparable roles.
Weaknesses
Limited SKU Selection
The average Costco warehouse stocks about 4,000 products. That is between 2.86% and 8.89% of what competing retailers carry. This curated approach drives per-item volume but creates blind spots. Customers looking for specific brands or niche products often have to shop elsewhere. Costco’s model depends on high sell-through for a small number of items, leaving it exposed if consumer preferences shift faster than its buying team can adjust.
Membership-Dependent Revenue Model
Costco’s gross margins run around 11%, well below the retail average. The company essentially breaks even on product sales and relies on membership fees for profit. In fiscal 2025, membership fee income accounted for a disproportionate share of net income. If renewal rates dip even slightly — and Costco’s own management acknowledged a possible downtick heading into 2026 due to recent fee increases — the hit to profitability would be immediate. This is a core weakness of Costco that competitors without membership requirements do not share.
E-Commerce Still a Small Slice
Despite 22.6% e-commerce growth in Q2 2026, online sales still account for a modest share of Costco’s total revenue compared to Amazon or even Walmart’s digital operations. Costco was late to personalized recommendations, passwordless login, and same-day delivery partnerships. The company’s digital infrastructure, while improving, remains behind the leaders in the space.
Opportunities
International Expansion
Costco operates 924 warehouses globally, but 634 of those are in the U.S. International comparable sales grew 9.5% during the first 18 weeks of fiscal 2026, outpacing both the U.S. (5.9%) and Canada (7%). CFO Gary Millerchip said the company plans to split future openings roughly 50/50 between domestic and international markets. Japan (37 locations), Korea (20), and Australia (15) are all generating strong per-location sales. Countries like Spain and France still have single-digit store counts with room to grow.
Digital Sales Acceleration
Costco’s website traffic increased 32% and app traffic jumped 45% in Q2 2026. Personalized product recommendation carousels alone drove $470 million in e-commerce sales during the quarter. Same-day delivery through Instacart, Uber Eats, and DoorDash continues to grow faster than overall digital sales. Costco expanded its Instacart partnership to Spain and France in January 2026. The Costco Next marketplace is approaching 100 vendor sites.
Private-Label Growth
Analysts project Kirkland Signature could reach 35-40% of total sales by 2030, up from roughly 33% today. Each percentage point of additional penetration improves margin mix because Kirkland products carry higher margins than national brands. In a tariff-heavy environment, leaning further into domestic and private-label sourcing gives Costco pricing flexibility that brand-dependent competitors lack.
Threats
Tariff and Trade Policy Uncertainty
U.S. tariff policy has forced Costco to rethink its supply chain throughout 2025 and into 2026. The company filed a lawsuit in late 2025 seeking a full refund for tariffs paid during the year. CFO Millerchip said Costco is shifting production to lower-tariff countries, increasing domestic sourcing, and leaning harder into Kirkland Signature to absorb cost increases. Competitors like Walmart have already raised prices in response, while Costco has tried to hold the line — a strategy that pressures margins.
Intense Retail Competition
Walmart’s global e-commerce sales grew 22% year-over-year in early fiscal 2026. Amazon continues to expand its grocery presence and Prime membership perks. Sam’s Club, owned by Walmart, has been investing in technology upgrades and membership growth. Dollar General saw its stock surge 33% in the past year. Target competes across multiple categories. BJ’s Wholesale Club accepts manufacturer coupons and does not require a membership for online orders. Costco’s premium valuation — a forward P/E ratio of about 45.8 versus the industry average of 32.2 — leaves little room for missteps.
Slowing Membership Growth Rate
Total paid membership growth slowed to 6% year-over-year in fiscal 2025, down from 7% the previous year. The September 2024 fee increase — $5 more for basic memberships and $10 more for Executive — has not yet caused a significant dip, but management warned it could reduce renewal rates in 2026. Costco installed card scanners at warehouse entrances in 2024 to crack down on membership sharing, which may have inflated earlier member counts. Online sign-ups, which tend to have lower initial renewal rates, are an increasing share of new memberships.
FAQ
What are Costco’s biggest strengths?
Costco’s strengths include a 92.3% U.S.-Canada membership renewal rate, $90 billion in annual Kirkland Signature sales, industry-leading employee wages above $31/hour, and consistent 8%+ annual revenue growth.
What are the main weaknesses of Costco?
Costco’s weaknesses center on its limited 4,000-SKU product range, thin gross margins of about 11%, dependence on membership fees for profit, and an e-commerce operation that still trails Amazon and Walmart.
How many Costco warehouses are there in 2026?
Costco operates 924 warehouses across 14 countries as of Q2 2026. The company plans to open 28 new locations in fiscal 2026 and targets 30+ annually in future years.
What threats does Costco face in 2026?
The biggest threats to Costco include U.S. tariff uncertainty, aggressive e-commerce expansion by Amazon and Walmart, slowing membership growth rates, and a stock valuation that leaves little margin for error.
How much revenue does Costco generate?
Costco reported $275.2 billion in total revenue for fiscal 2025. First-half fiscal 2026 net sales reached $134.2 billion, putting the company on pace to approach $300 billion for the full year.
