Not a “Multimillionaire Maker,” But Is Costco (COST) a Buy in 2026?

TradingKey - Costco Wholesale Corp. (COST) has built a strong sense of loyalty from consumers over the years by pursuing a fiercely low-price strategy. It's the one-stop shop for everything from detergent to toaster ovens, to toilet paper to televisions. The engine that powers these "rock-bottom" prices is buying in bulk. In this setup, Costco has very low purchasing costs and the company can profit without high retail markups.

The company’s consistently growing profits have helped push its share price steadily higher over the past several years – a trend the investment community watches greedily. But at today's valuation, can Costco still be counted among the millionaire-making machines? 

Costco’s Core Strategic Advantages

Costco is a global company, but its strength still lies in the US and Canada, where it has more than 700 warehouses. It is this footprint that is expanding. Consumer sentiment in these core markets is remarkably high, as evidenced by membership renewal rates that consistently exceed 90% annually.

The Membership Engine

The majority of Costco’s profit comes from its membership fees. The company has two levels: the $65 Gold Star and the $130 Executive membership. The sustained move to Executive memberships and stable renewal rates, gives us good visibility into income growth. It's this predictable, steady fee revenue that allows Costco to keep offering those highly competitive pricing on its products. 

The Working Capital Cycle

Costco’s pricing advantage is also a byproduct of its capital efficiency. In essence, the company operates using supplier capital. This is not an overstatement. Due to hyper-fast inventory turnover and extended payment terms with vendors, Costco often generates cash from sales weeks before its own payables are due.

This creates a robust cash float, enabling the company to fund new warehouses and short-term investments without incurring significant interest expenses – a level of financial efficiency that eludes traditional retailers.

Strategic SKU Management

Unlike competitors, Costco maintains a disciplined, streamlined product selection. While a typical Walmart stocks over 100,000 items, Costco limits its selection to approximately 3,000 to 4,000 SKUs. This concentration grants Costco immense bargaining power; for any given category, the company may only deal with a single supplier. This deep integration lowers procurement costs and significantly simplifies logistics and warehousing, further reducing overhead.

Costco’s Counter-Cyclical Resilience

A defining characteristic of this retail giant is its stability across economic cycles. During downturns, as consumers tighten spending, Costco’s value proposition becomes even more pronounced. Having already paid a membership fee, customers tend to increase their shopping frequency at Costco to "amortize" the cost of the membership through savings on bulk goods.

Is 2026 the time to buy COST Stock?

Can Costco still mint millionaires? Ten years ago, a $10,000 stake would be worth more than $60,000 today. All that would be impressive enough, but it’s still nowhere near the million dollar mark - unless the starting capital was very large.

But to become a multi-millionaire requires playing the long game with quality stocks like Costco as part of a diversified portfolio. The secret: holding for the long haul.

It centers on the “snowball effect” of compounding, where reinvested returns generate their own earnings in a self-reinforcing cycle. Costco is a classic “compounder.” If the company keeps up with a steady 12% to 15% annual compound growth rate, the pure mathematics of exponential growth will take over.

Also, Costco has an unusual financial practice of paying out giant special dividends. The company pays excess cash to shareholders in the form of special dividends, on top of the regular quarterly dividends — as was the case with the $15-a-share special dividend in early 2024.That’s what makes getting into Costco early a good idea. 

Why buy in 2026 or why not buy in 2026? As evidence for a potential broad-based economic downturn begins to appear, Costco serves as a defensive holding. Its operations have been resilient historically during the 2008 financial crisis and 2020 pandemic as the membership model creates a very stable base for cash flow.

In the end, Costco is the “ballast” of an investment portfolio. Although its short-term price action is not always as leading as some of the other GAFA stocks, the stock offers critical capital protection in the event of a sudden and violent correction in high-growth tech or speculative sectors.