International expansion and new growth channels support Costco's long-term growth runway

Overview

Bernstein hosted a meeting between investors and Costco Chief Financial Officer Gary Millerchip on August 5, 2026, to discuss warehouse and membership growth, e-commerce, retail media, and agentic artificial intelligence. The report believes Costco's long-term growth thesis remains solid, with key drivers including global warehouse expansion, international market penetration, member lifetime value, and digital monetization opportunities that are still at an early stage.

Core views

Costco plans to raise its pace of new store openings to about 30 per year over the next decade, and to ease site selection and capacity constraints through more flexible real estate solutions such as mixed-use residential developments, rooftop public facilities, and standalone gas stations. In the near term, new stores will still be skewed toward the United States and more mature international markets, so membership growth may moderate from post-pandemic high-single digits to the mid-single digits. Digital capabilities still lag peers such as Walmart, but retail media has substantial growth potential thanks to high-quality first-party data, broad merchandise and service scenarios, and a low revenue base. E-commerce has become profitable, but still dilutes margins; AI channel conversion rates are higher, but agentic AI currently accounts for only a very small share of e-commerce sales.

Analysis framework

The report centers on management interviews and forms a fundamental view by incorporating store expansion plans, membership registration and renewal trends, e-commerce fulfillment economics, retail media monetization capability, artificial intelligence applications, and monthly comparable-sales drivers, while using forward earnings per share and a P/E multiple methodology to determine the target price.

Methodology notes

• Valuation methodsForward P/E valuation method

  Apply a target P/E multiple to forward earnings-per-share forecasts.

  Bernstein applies a 48.0x P/E multiple to its EPS forecast of USD 24.87 for the 5th to 8th forward quarters, resulting in a USD 1,194 target price.

• Operating analysisComparable-sales driver decomposition

  Assess comparable-sales quality by observing traffic, average ticket, and category performance.

  The report combines monthly comparable sales, two-year stacked traffic growth, and average-ticket changes to assess U.S. business momentum; U.S. comparable sales still grew 6.9% in July despite a high base.

• Growth analysisStore and membership growth framework

  Assess growth runway through the number of new warehouses, regional mix, member acquisition, and renewal maturation curves.

  The report combines the plan for approximately 300 new stores over the next decade with the opening mix in the U.S. and international markets, and assesses the impact of online registration, shopping frequency, and renewal rates among younger members as they change over the lifecycle.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• COST.US

  Core covered company in the report, with an Outperform rating maintained.

  Strengths

  The membership model has strong stickiness; there is ample room for global warehouse expansion; first-party member data is high quality; July comparable sales and traffic performance were solid; retail media and artificial intelligence applications provide incremental growth.

  Weaknesses

  Digital capabilities still lag peers such as Walmart; e-commerce is profitable but dilutes margins; younger members have relatively lower shopping frequency and renewal rates; recent membership growth faces normalization.

  Comparison

  Compared with peers such as Walmart, Costco's digital capabilities are weaker, but its member data, price image, merchandise quality, and ability to reach customers across merchandise and service scenarios constitute differentiated advantages.

  Risks

  A weakening consumer environment, failure to meet new store targets, declines in membership renewal or upgrade rates, and earnings misses amid high valuation.

Key data

• Target priceUSD 1,194.00Based on a 48.0x forward P/E and an EPS forecast of USD 24.87 for the 5th to 8th forward quarters.
• Closing priceUSD 941.99As of August 5, 2026.
• Potential upside27%Calculated from the report's target price and closing price and presented in the report.
• New warehouses over the next decadeApproximately 300Equivalent to an average of about 30 per year, above the historical annual average of about 20 to 25.
• Share of U.S. new stores over the next 12 monthsAbout two-thirdsInternational new stores are mainly concentrated in more mature markets such as the United Kingdom, Spain, Canada, and Mexico.
• Recent membership growthMid-single digitsExpected to slow from post-pandemic high-single-digit growth, but consistent with the company's historical average.
• Share of new member registrations online40%Online registration is usually driven by younger customer cohorts.
• July U.S. comparable-sales growth6.9%Growth in the same period last year was 6.5%, showing that operating momentum remains solid despite a high base.
• Adjusted EPSUSD 18.21 in FY2025; expected USD 20.64 in FY2026; expected USD 23.30 in FY2027Corresponding to forecasts for FY2025 to FY2027.
• Adjusted P/E51.7x in FY2025; 45.6x in FY2026; 40.4x in FY2027Valuation declines year by year as expected earnings grow, but the absolute level remains high.

Impact & implications

Faster warehouse expansion is expected to broaden the membership base and sales scale, while international markets represent long-term incremental growth. Younger members currently have lower shopping frequency and renewal rates, which may limit near-term membership revenue growth, but their lifecycle maturation and the company's enhanced communication of membership benefits are expected to improve long-term value. Retail media and personalized marketing can not only contribute advertising revenue, but may also increase basket size and merchandise sales; artificial intelligence may improve search exposure, member services, and employee efficiency. However, e-commerce fulfillment costs, gaps in digital capabilities, and elevated valuation mean that insufficient operating delivery could trigger meaningful valuation compression.

Risks

• An unexpected weakening of the consumer environment in the United States or major international markets could slow comparable sales and cause expense deleverage.
• Failure to meet new store expansion targets in the United States and international markets could weaken member acquisition and sales growth.
• Membership renewal rates or executive membership upgrade rates below historical levels could depress overall profitability.
• E-commerce fulfillment costs and markups on third-party instant delivery may limit improvements in user experience and continue to dilute margins.
• Progress in improving digital capabilities, monetizing retail media, or applying artificial intelligence may be slower than expected.
• The high forward P/E requires sustained growth, and fundamentals falling short of expectations could lead to valuation compression.

What to watch

• Actual number of store openings over the next 12 months, the new store mix between the U.S. and international markets, and site selection progress.
• Whether membership growth can stabilize in the mid-single digits, and changes in renewal rates and shopping frequency among younger members.
• The share of new member registrations online and the effect of membership-benefit communication measures on improving renewal rates.
• The sustainability of U.S. monthly comparable sales, traffic, average ticket, and category contributions.
• Supplier participation in retail media, personalized reach capability, and its impact on driving basket size.
• E-commerce margins, and progress in narrowing the gap between third-party instant delivery prices and in-store prices.
• Conversion rates from AI search channels, the share of sales from agentic AI, and the rollout of in-app member assistants.
• The degree to which FY2026 and FY2027 EPS forecasts are achieved, and the sustainability of the 48.0x target valuation multiple.