Costco's Executive Penetration Could Unlock More Earnings
Costco Wholesale CorporationCOST continues to demonstrate that its membership model remains one of the strongest drivers of profitability. The biggest opportunity lies in expanding the executive membership base rather than simply adding more members. While total paid memberships increased 4.1% year over year to 82.9 million during the third quarter of fiscal 2026, executive memberships climbed a much faster 9.6%, reflecting stronger adoption of the premium tier. This trend matters because executive members typically shop more often, spend more during each visit and generate higher recurring membership income, creating a more attractive earnings mix.
Management highlighted that membership fee income rose 10.7% year over year to $1,373 million, with part of the improvement coming from the September 2024 fee increase. Excluding the fee increase and foreign exchange, membership income still advanced 7%, driven by membership growth and continued upgrades into executive memberships.
Costco ended the quarter with 41.2 million paid executive memberships. Executive members accounted for 75% of worldwide sales. The company also launched the executive program in China during the quarter and described early adoption as stronger than expected, creating another avenue for premium membership expansion.
Management also noted that executive growth is being supported by both existing Gold Star members upgrading and new customers choosing the premium tier from the outset. Enhanced benefits, including extended warehouse hours and Instacart incentives, are encouraging higher adoption. Continued penetration of executive members has the potential to steadily strengthen Costco's earnings profile through richer membership income and higher member engagement.
How WMT & BJ's Membership Growth Compares With Costco
Costco is not the only retailer benefiting from a stronger membership ecosystem. Walmart Inc.WMT continues to deepen engagement through Walmart+, with membership fee revenues rising 17.4% globally in the first quarter of fiscal 2027 and Walmart+ recording a record level of net additions. Management noted that membership has become an increasingly important profit stream, with members spending significantly more than non-members and utilizing benefits such as fuel savings and faster delivery.
BJ's Wholesale Club Holdings, Inc.BJ reported robust membership trends. Membership fee income increased 9.9% year over year to a record $132.4 million during the first quarter of fiscal 2026, supported by strong member acquisition, retention and higher-tier membership penetration. BJ's Wholesale emphasized that higher-tier members remain more engaged, shop more frequently and generate greater lifetime value.
Both Walmart and BJ’s Wholesale demonstrate that a growing base of loyal, higher-value members can drive recurring revenues, stronger engagement and long-term sales growth.
What the Latest Metrics Say About Costco
Costco has seen its shares tumble 5% over the past three months compared with the industry’s decline of 1.5%.
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From a valuation standpoint, Costco's forward 12-month price-to-earnings ratio stands at 42.84, higher than the industry’s ratio of 30.91. However, it is trading below its 12-month median level of 46.39, indicating some moderation in valuation despite sustained investor confidence in the stock.
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The Zacks Consensus Estimate for Costco’s current financial-year sales and earnings per share implies year-over-year growth of 9.4% and 13.3%, respectively. For the next fiscal year, the consensus estimate indicates a 7.8% rise in sales and 10.2% growth in earnings.
The consensus estimate for earnings per share for the current and next fiscal year has increased by 5 cents and 6 cents to $20.38 and $22.46, respectively, over the past 30 days.
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Costco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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