Is Costco Stock a Buy in March 2025?

Justin Pope, The Motley Fool

Sat, Mar 15, 2025, 3:07 PM 5 min read

Costco Wholesale (NASDAQ: COST) is famous for several reasons. The big-box retailer is renowned for its low prices, vast product selection, and $1.50 hotdog meal combo, a favorite among shoppers that has remained the same price since its introduction in 1984.

The company is equally popular among investors. Late billionaire Charlie Munger, known most for his friendship and work alongside Warren Buffett, owned stock and served on the company's board for years. Costco Wholesale has proven to be a tremendous investment, generating total returns exceeding 150,000% from the early 1980s.

It's as strong a resume as you'll find in a stock. But can investors count on Costco Wholesale moving forward? After all, past returns don't guarantee future results.

Here is whether investors should buy Costco Wholesale stock right now.

The retail space is highly competitive. However, Costco Wholesale has carved out its niche as a leading big-box warehouse club retailer where consumers can buy things in bulk quantities but need a membership. It has nearly 900 warehouse stores worldwide, including 617 in the United States, and generated $264 billion in revenue over the past four quarters.

Costco's business model is simple. It sells products at very thin margins and makes money on membership fees. Last quarter, Costco's membership fees of $1.19 billion represented just 1.8% of total revenue but 51.5% of total operating income! Product selection, low prices, popular private-label brands, and quirky perks (the $1.50 hotdog) have translated to a sterling reputation that attracts shoppers.

In 2023, Axios ranked Costco as the second-most trusted U.S. company among consumers. Its brand power is so strong that Costco doesn't spend money on advertising because it doesn't need to, making it a formidable force in the retail space.

Costco's customers are often high earners since buying in bulk can require spending large sums of money upfront. This demographic is lucrative because the top 10% of earners in America account for approximately half of all consumer spending. You can see that Costco's top and bottom lines have grown without much interruption over the past decade, which goes a long way in explaining the stock's stellar returns.

The cool part about Costco's success is that it's primarily organic. The company is growing because more people are shopping at Costco stores. Active warehouses have increased from 540 in 2010 to 897 today. Plus, years of inflation tack growth onto the business when you're a cost leader selling goods at razor-thin markups. In other words, Costco grows as merchandise becomes more expensive over time.