If You’d Invested $5,000 in Costco Stock 10 Years Ago, Here’s How Much You’d Have Today

The retailer’s unusual business model is still proving surprisingly marketable, suggesting the company delivers the value its members expect.

Consumer demand for basics like food and cleaning supplies is persistent, but it’s not like selling these goods is a high-growth business. Indeed, retailing tends to be a slow-growth industry. Most retailers’ stocks perform accordingly.

There are some exceptions to this norm, however. Club-based warehouse retailer Costco Wholesale (COST 0.35%) is one of them. It’s been a star performer since the 1990s, and there’s room for more of the same going forward.

Outgrowing its competition

Costco stores offer many of the same products sold by competitors like Walmart or Kroger, but with one glaring exception. That is, only paying members of the club are permitted to shop at Costco. The annual fees start at $60 per year, but they can grow quickly with the addition of more perks and authorized users.

The business model works: Over the course of the past decade, the number of club members has grown from less than 40 million to over 74 million, while its store count has expanded from 655 then to over 870 now. Annual revenue has swollen from fiscal 2014’s $110 billion to an estimated $259 billion for the fiscal year ending in August.

Perhaps most importantly, Costco stock soared 634% during that 10-year stretch. A $5,000 investment in the company then would be worth roughly $36,700 today.

Costco’s built for the looming future

Past performance is no guarantee of future results, and Costco’s growth trajectory is in question. The consumer goods retailing arena was crowded before, and it’s even more crowded now.

As people’s shopping preferences evolve, however, they’re doing so in a way that favors Costco. People are increasingly comfortable paying subscription fees for access to goods and services, and they’re increasingly value-minded as well. The bigger Costco gets, the more value it can offer its shoppers, spinning a cycle of demand-driven membership growth that in turn drives same-store sales growth. The future favors the unique nature of Costco’s business.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Walmart. The Motley Fool recommends Kroger. The Motley Fool has a disclosure policy.

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