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Why China Could Become Costco's Next Membership Catalyst
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Key Takeaways
Costco's China Executive Membership rollout beat expectations, with member activity above assumptions.
Executive members drive 75% of global sales, shop more often and spend more per visit.
With seven China warehouses, Costco sees room to expand fee income, frequency and loyalty.
Costco Wholesale Corporation’s (COST - Free Report) China business is emerging as a promising catalyst for the next phase of membership growth. The company launched its Executive Membership program in China in the third quarter of fiscal 2026 and reported strong early adoption. Management said the rollout was ahead of expectations, with member activity exceeding initial assumptions. Executive members typically shop more often, spend more per visit and generate higher recurring membership income.
We note that the company’s global executive membership base reached 41.2 million at quarter-end, up 9.6% year over year. Executive members accounted for 75% of worldwide sales. Management noted that executive growth is being supported by both existing Gold Star members upgrading and new customers choosing the premium tier from the outset.
Management highlighted China alongside Japan and Korea as key international regions with immense growth potential for future warehouse development. The company currently operates seven warehouses in China. Costco has observed that new warehouse openings in China can produce outsized membership growth. Strong early adoption of the Executive Membership program signals that Chinese consumers are rapidly embracing higher-tier membership benefits.
As Costco expands its global real estate footprint with new warehouse openings, China offers a fresh runway for growth. If executive penetration continues to build as Costco opens more warehouses, China could become a larger contributor to fee income, shopping frequency and member loyalty.
What the Latest Metrics Say About Costco
Costco, which competes with Dollar General Corporation (DG - Free Report) and Target Corporation (TGT - Free Report) , has seen its shares drop 8.3% over the past three months compared with the industry’s 2.7% decline. While shares of Dollar General have fallen 0.4%, those of Target have jumped 6.7% in the aforementioned period.
Image Source: Zacks Investment Research
From a valuation standpoint, Costco's forward 12-month price-to-earnings ratio stands at 41.70, higher than the industry’s ratio of 30.64. However, the stock is trading below its 12-month median level of 46.1, indicating some moderation in valuation despite sustained investor confidence in the stock.
Costco is trading at a premium to Target (with a forward 12-month P/E ratio of 16.03) and Dollar General (15.67).
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Costco’s current financial-year sales and earnings per share implies year-over-year growth of 9.6% and 13.5%, respectively. For the next fiscal year, the consensus estimate indicates a 7.8% rise in sales and 10.2% growth in earnings.
The consensus estimates for earnings per share for both the current and next fiscal year have increased by 6 cents to $20.42 and $22.50, respectively, over the past 60 days.
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Why China Could Become Costco's Next Membership Catalyst
Key Takeaways
Costco Wholesale Corporation’s (COST - Free Report) China business is emerging as a promising catalyst for the next phase of membership growth. The company launched its Executive Membership program in China in the third quarter of fiscal 2026 and reported strong early adoption. Management said the rollout was ahead of expectations, with member activity exceeding initial assumptions. Executive members typically shop more often, spend more per visit and generate higher recurring membership income.
We note that the company’s global executive membership base reached 41.2 million at quarter-end, up 9.6% year over year. Executive members accounted for 75% of worldwide sales. Management noted that executive growth is being supported by both existing Gold Star members upgrading and new customers choosing the premium tier from the outset.
Management highlighted China alongside Japan and Korea as key international regions with immense growth potential for future warehouse development. The company currently operates seven warehouses in China. Costco has observed that new warehouse openings in China can produce outsized membership growth. Strong early adoption of the Executive Membership program signals that Chinese consumers are rapidly embracing higher-tier membership benefits.
As Costco expands its global real estate footprint with new warehouse openings, China offers a fresh runway for growth. If executive penetration continues to build as Costco opens more warehouses, China could become a larger contributor to fee income, shopping frequency and member loyalty.
What the Latest Metrics Say About Costco
Costco, which competes with Dollar General Corporation (DG - Free Report) and Target Corporation (TGT - Free Report) , has seen its shares drop 8.3% over the past three months compared with the industry’s 2.7% decline. While shares of Dollar General have fallen 0.4%, those of Target have jumped 6.7% in the aforementioned period.
Image Source: Zacks Investment Research
From a valuation standpoint, Costco's forward 12-month price-to-earnings ratio stands at 41.70, higher than the industry’s ratio of 30.64. However, the stock is trading below its 12-month median level of 46.1, indicating some moderation in valuation despite sustained investor confidence in the stock.
Costco is trading at a premium to Target (with a forward 12-month P/E ratio of 16.03) and Dollar General (15.67).
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Costco’s current financial-year sales and earnings per share implies year-over-year growth of 9.6% and 13.5%, respectively. For the next fiscal year, the consensus estimate indicates a 7.8% rise in sales and 10.2% growth in earnings.
The consensus estimates for earnings per share for both the current and next fiscal year have increased by 6 cents to $20.42 and $22.50, respectively, over the past 60 days.
Image Source: Zacks Investment Research
Costco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.