Why Costco Has Outpaced the Nasdaq for Five Years

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This is the fifth piece in a series examining "boring" large-cap stocks that have outperformed the Nasdaq-100 over the past five years. The first piece introduced the five companies and the data. The second piece covered defense and nuclear supplier Curtiss-Wright. The third looked at pipeline operator Williams Companies. The fourth covered industrial manufacturer Parker Hannifin. This week we look at a “boring” warehouse club that boasts more than 80 million members who pay for the privilege of shopping, and then renew that connection year-in and year-out.

Costco (COST) is anything but an average retailer, and this is particularly true when it comes to the performance of its stock. While the tech-laden Nasdaq-100 index garners all of the headlines, it has “only” returned 117.29% over the five-year period ending June 17, 2026. Costco, on the other hand, has provided shareholders with a 167.59% gain over that same stretch.

These returns were built in part on $4.99 rotisserie chickens and $1.50 hot dog combos. But there’s a lot more going on behind the scenes that has transformed the company into something far beyond the average retailer.

MORE FROM THE ‘BORING STOCKS’ SERIES

• Part 1:These stocks crushed the Nasdaq-100 over past 5 years
• Part 2:This stock has had a 500% return on investment
• Part 3:Boring, quiet and beating the market
• Part 4:An annual dividend that’s increased for 70 straight years

IMPORTANT: This article is for educational purposes only and does not constitute investment advice. Past performance does not guarantee future results. You should conduct your own research and consult a financial advisor before making any investment decisions.

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What Costco Actually Does

Jim Sinegal and Jeffrey Brotman opened the first Costco warehouse in Seattle on Sept. 15, 1983. The idea behind the company was quite innovative: buy and sell in bulk quantities, mark up prices as little as possible and pass the savings along to customers. And the strategy has worked.

For the third quarter of fiscal 2026, the company reported net sales of $69.15 billion, up 11.6 percent from a year earlier, with net income climbing 15.2 percent to $2.19 billion. Unlike some of its competitors, Costco’s strength is not in variety. Rather, it stocks its warehouses with only a few thousand items at a time. This keeps inventory turning fast and lets the company negotiate hard with suppliers on the items that it does carry.

Costco keeps prices so low that more than half of its operating income comes from renewal fees, even though they only represent a sliver of total sales. Customers are fans of the company’s reputation for low prices and for the “treasure hunt” aspect of its warehouses. Global renewal rates have held near 90 percent for years, and in the latest quarter, the renewal rate in the U.S. and Canada was above 92 percent. That kind of retention, in turn, allows Costco to continue running thin margins on its products while still boosting earnings reliably.

The Secret Success of Costco’s Private Label Brand Kirkland Signature

Costco's private label, Kirkland Signature, doesn’t advertise. Yet it has grown to be one of the world’s largest consumer brands, generating roughly $90 billion in sales in 2025.

Costco's own executives have said Kirkland items typically run 15 percent to 20 percent cheaper than the national-brand equivalents while matching or beating them on quality. This entices customers to buy the Costco in-house brand even when a national name brand sits one shelf over.

Kirkland products pull double duty for Costco because they create greater earnings for the company while simultaneously deepening member loyalty to the membership itself. These are both huge contributors to the company’s overall profitability.

The Numbers

• Q3 fiscal 2026 net sales: $69.15 billion, up 11.6 percent year over year
• Comparable sales: up 9.8 percent company-wide, up 6.6 percent excluding gas and currency effects
• Net income: $2.19 billion, up 15.2 percent
• Diluted earnings per share: $4.93, up from $4.28 a year earlier
• Membership: 82.9 million paid memberships, 148.5 million total cardholders
• Renewal rate: 89.7 percent worldwide, 92.2 percent in the U.S. and Canada
• Dividend: raised to $1.47 a share quarterly in April 2026, the 22nd consecutive annual increase
• Capital return: a roughly $5.3 billion special dividend paid in January 2026, the latest in a string of special payouts dating back to 2012

What This Means for You

Costco has long traded at a premium to most retailers, and over the past five years in particular, the shares have outperformed even the high-flying, tech-heavy Nasdaq-100 index. Costco has rewarded shareholders handsomely because it has something that every company desires: consistent, predictable, growing and recurring revenue. The company has a fortress-like balance sheet that supports a small dividend and the occasional multibillion-dollar special payouts. Coupled with little debt, the company’s financial strength is reflected in its AA credit rating issued by Fitch.

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Whether or not Costco can continue this run in the future is uncertain. The business model certainly appeals to customers and shareholders alike. But for the stock to keep its lofty valuation, renewal rates must remain high, and membership must continue to grow. This is not a recommendation to buy shares of Costco. But it shows how a “boring” stock like a warehouse retailer can exceed the returns of flashy tech stocks that dominate the financial news.

Up next in this series is Eaton (ETN), an electrical equipment maker with “boring” roots that’s profiting from the data center and grid-modernization wave reshaping the power sector.

IMPORTANT: This article is for educational purposes only and does not constitute investment advice. Past performance does not guarantee future results. You should conduct your own research and consult a financial advisor before making any investment decisions. Performance figures are 5-year total returns with dividends reinvested, sourced from totalrealreturns.com as of market close on June 17, 2026.

This ‘boring but powerful stocks’ series has been written by Nifty 50+ for TheStreet