Costco Wholesale Corporation (COST): What Makes This Retailer So Addictive?

Reliable earnings, wide moat
Put together, Costco’s guarantee of good value as well as a shopping experience carefully designed to be enjoyable instead of stressful is a potent combination. In November 2011, Costco Wholesale Corporation (NASDAQ:COST) raised the price of its annual membership fee by 10%, to $55 for households and $110 for businesses. A year later, there has been no appreciable pushback from customers, as North American renewal rates actually increased to nearly 90%. Costco plans to raise membership fees slightly every five or six years, and it appears that members are all right with that.

Costco Wholesale Corporation (NASDAQ:COST) also books the revenue from membership sales in a lump sum, representing four quarters of income. This, combined with Costco’s remarkably high renewal rate, gives investors very good earnings visibility. Since shoppers are unlikely to pay for multiple club memberships, Costco has a strong advantage in keeping competitors at bay. With a strong track record of growing same-store sales, and a plan to open 25 to 30 new stores per year for the near future, Costco Wholesale Corporation (NASDAQ:COST) is on track to continue its market-beating performance.

The article What Makes This Retailer So Addictive? originally appeared on Fool.com.

Fool contributor Daniel Ferry owns shares of Costco Wholesale. The Motley Fool recommends Costco Wholesale. The Motley Fool owns shares of Costco Wholesale.

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