Costco's resilience in economic downturns
One big reason why analysts favour Costco (NASDAQ:COST) stock is because of the brand’s “membership lock-in,” explained analysts at Bernstein, a U.S.-based private wealth management firm in a recent interview. They noted that its membership-based model and emphasis on consumer staples enable it to capture market share when macroeconomic conditions worsen. They state that Costco is among the top companies poised to endure economic challenges due to these factors.
The analysts at global wealth manager UBS echoed these sentiments, highlighting Costco's ability to navigate uncertain macroeconomic backdrops better than many retailers. They attribute this to Costco's flexibility in product offerings and the high-margin revenue from membership fees, which provide a buffer against economic headwinds.
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Get started todayCostco’s membership model offers a stable revenue return
One reason for the bullish outlook for Costco stock is the firm’s membership model. Costco’s membership fees are a significant contributor to its profitability. In fiscal year 2024, membership fees accounted for over 65% of the company's net operating income.
This recurring revenue stream offers stability, especially during economic downturns when consumers seek value.
The company's high membership renewal rates further underscore customer loyalty. As of the first quarter of fiscal 2025, the renewal rate in the U.S. and Canada stood at 93%, with a worldwide rate of 90.5%.
Costco’s stock performance amid market volatility
Costco's stock has demonstrated resilience during market downturns. For instance, during the COVID-19 pandemic in 2020, while the S&P 500 experienced a significant decline, Costco's stock recovered swiftly, reflecting investor confidence in its business model.
As of May 27, 2025, Costco stock was trading around US$1,013, reflecting a year-to-date increase of approximately 10%. (For Canadian investors not interested in U.S.-traded stock, the TSX-traded Costco stock (COST.TO) was trading around C$46.30.
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Find Your Card NowStrategic flexibility and operational efficiency
Costco's operational model allows it to adapt quickly to changing economic conditions. The company’s Chief Executive Officer (CEO) Ron Vachris, emphasizes the company's ability to manage challenges, stating that their "treasure hunt" strategy and strong supplier relationships help maintain low prices despite potential tariffs and supply chain disruptions.
Bottom line
Costco's consistent performance, strong membership model, and strategic flexibility make it a compelling option for investors seeking stability during economic uncertainties.
Sources
1. Investopedia: These 3 Retailers Could Be Best Positioned To Weather ‘Macro Storm,’ Bernstein Says (March 25, 2025)
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