Costco Whsl Corp New — Business Overview

What does Costco do?

Costco operates a chain of membership-based warehouse clubs that sell a curated selection of goods at low prices. The basic idea is simple: you pay an annual fee to shop, and in return you get access to high-quality products at prices Costco says are lower than what you'd find elsewhere. As of August 31, 2025, Costco ran 914 warehouses worldwide, each averaging about 147,000 square feet. The business deliberately keeps its product selection tight — fewer than 4,000 active SKUs (stock keeping units, i.e., distinct product lines) per warehouse — so it can buy in enormous volume and negotiate lower prices from suppliers.

Costco's merchandise and services fall into three broad buckets:

Kirkland Signature, Costco's private-label brand, is a meaningful part of the business. The filing notes that Kirkland Signature products are priced below national brands while generally earning higher margins for Costco. The company says it plans to keep growing its share of private-label sales over time.

How does Costco make money?

Membership fees are the financial backbone of Costco's profit model. There are two main tiers: a standard Gold Star or Business membership at $65/year in the U.S., and an Executive membership at an additional $65/year. Executive members earn a 2% reward on purchases (capped at $1,250/year). As of fiscal year 2025, Executive members represented 38,700 of the total 81,000 paid members (in thousands) and accounted for approximately 73.6% of worldwide net sales — so the higher-fee tier punches well above its weight.

On top of fees, Costco earns revenue by selling merchandise and services at deliberately thin gross margins. The whole model is built around rapid inventory turnover — Costco often collects payment from customers before it even has to pay its own suppliers. This means the business generates significant cash flow even though its retail markups are intentionally slim. The membership fee effectively subsidizes the low prices, creating a flywheel: low prices attract members, members pay fees, fees fund the ability to keep prices low.

What market does Costco operate in?

Costco competes in the broad retail industry, with a specific niche in the warehouse club format. The relevant competitive set spans supermarkets, supercenters, hard discounters, online retailers, and specialty stores. This is a mature but large and resilient market — consumer spending on groceries and everyday goods tends to hold up even in economic downturns, which gives warehouse clubs a degree of defensive quality.

Secular trends are generally working in Costco's favor. Consumers persistently seek value, and the membership model rewards bulk buying. The shift toward digitally-enabled commerce also plays to Costco's strengths: the filing notes that digitally-enabled sales (including Costco Travel) represented about 10% of total net sales in 2025, with dedicated e-commerce adding another 7%. The company operates e-commerce in eight countries.

Who are Costco's main competitors?

The warehouse club format is a relatively concentrated niche within the broader, highly fragmented retail industry. The filing calls out Walmart's Sam's Club and BJ's Wholesale Club as direct warehouse club competitors in the U.S. Many U.S. metro areas and some international markets have multiple competing clubs. Beyond that format, Costco also faces competition from Walmart, Target, Kroger, and Amazon in general merchandise.

Costco's claimed competitive advantages center on price, trust, and loyalty. A 92.3% membership renewal rate in the U.S. and Canada (89.8% worldwide) at the end of fiscal 2025 is a concrete signal that members believe the value proposition is real. The company also points to its tight SKU count, direct supplier relationships, efficient depot-based distribution, and Kirkland Signature as structural cost and differentiation advantages. With 341,000 employees and a stated average U.S. hourly wage of about $32.00, Costco also argues that well-paid, stable employees contribute to warehouse productivity.

Where does Costco operate?

The U.S. is Costco's home base and largest market, with 223,000 of its 341,000 employees located there. Beyond the U.S. and Puerto Rico, Costco has warehouses in Canada, Mexico, Japan, the U.K., Korea, Australia, Taiwan, China, Spain, France, Sweden, Iceland, and New Zealand. Canada is the next largest employee base with 55,000 staff, followed by all other international markets combined at 63,000.

E-commerce extends the geographic reach further. Costco runs online shopping in the U.S., Canada, Mexico, the U.K., Korea, Taiwan, Japan, and Australia. The filing mentions that for future supply needs, the company is actively pursuing supply-chain diversification and expanding in-country production — a signal that it is aware of geopolitical and sourcing risks tied to any over-reliance on a single region, though no specific country concentration risk is called out by name.