On December 5, 1985, Costco Wholesale, then a two-year-old retail entity, launched its initial public offering (IPO) at a price of $10 per share. Shortly after, in January 1986, the company disclosed its initial earnings report for the quarter ending November 24, announcing net sales of $134.5 million. This report was notable not only for the significant sales milestone but also because the company had nearly tripled its sales within a year while achieving profitability during the same period.
Fast forward forty years to Costco’s first quarter of fiscal year 2026, and the retailer reported net sales amounting to $65.98 billion, reflecting an 8.2% increase compared to the previous year. The company's global footprint has expanded to encompass 921 warehouses worldwide, with recent openings in Spain and France marking its geographic growth. Moreover, Costco plans to inaugurate 28 new warehouse locations within fiscal 2026, a considerable expansion given that new stores averaged $192 million in sales in the prior year.
Amid prevalent challenges facing brick-and-mortar retailers—highlighted by numerous store closures from established chains like Kohl's and Macy's and bankruptcies among other brands—Costco stands out for its confident pricing and prosperity. The retailer implemented a membership fee increase from $60 to $65 last year, concomitant with a 5.2% year-over-year uptick in its paid membership base, now totaling 81.4 million members. Additionally, renewal rates in the U.S. and Canada remain robust at 92.2%.
Costco's sustained customer loyalty can be attributed to its steadfast business model emphasizing minimal markup. The company adheres to a pricing philosophy of charging no more than cost plus a 14% margin, or 15% for its private label products. This dedication extends to popular offerings such as the $1.50 hot dog and soda combo, a member-exclusive deal that has been maintained since the company's inception in 1985.
This commitment to value-driven pricing has garnered admiration from influential investors. Charlie Munger, renowned partner of Warren Buffett at Berkshire Hathaway, acknowledged Costco’s operational excellence, expressing a wish for all American companies to perform as effectively. Munger became the second-largest Costco shareholder, holding his shares without selling. However, Berkshire Hathaway sold its 4.3 million Costco shares, valued at $1.3 billion as of June 2020, in the third quarter of that year, a decision Buffett later described as "probably a mistake."
In hindsight, this divestiture was costly; Costco shares appreciated approximately 138% over the following five years. Consequently, the 4.3 million shares Berkshire Bournemouth relinquished would currently be worth around $3.66 billion. Concurrently, Costco has exhibited an 85% increase in dividend payouts since the sale, continuing a 21-year streak of consecutive annual dividend increases.
Beyond dividends, the company has actively repurchased shares, reinforcing shareholder value. In January 2023, Costco authorized a $4 billion share buyback program. During fiscal year 2025, it repurchased $2.18 billion of common stock, supplementing hundreds of millions of dollars spent on stock repurchases in the fiscal year 2024.
Share repurchases are inherently beneficial to shareholders by reducing the total outstanding shares, thereby increasing each shareholder's proportional ownership and potentially facilitating dividend growth since fewer shares must be serviced.
To quantify the financial impact of a long-term investment, the original IPO share price of $10, adjusted for stock splits over four decades, equates to approximately $1.67 per share in effective cost basis. This represents an increase of approximately 50,858%, meaning that an initial investment of $100 in Costco’s IPO would now be valued at around $86,058.
In addition, since Costco commenced dividend payments in 2004 at $0.10 per share—and without further stock splits—an investor holding shares purchased at IPO prices would currently receive annual dividend income approximating $1,329. This exemplifies the combination of capital appreciation and growing income potential that Costco has delivered.
The trajectory of Costco Wholesale over the past 40 years highlights the value that a consistent low-price strategy can bring in attracting a large and loyal customer base. It also illustrates how disciplined capital return policies, including dividends and share repurchases, compound value for long-term shareholders.