Half the Members, Three Quarters of the SalesWide moat

Costco Wholesale (COST) — moat facet

38.7 million Executive members are 48% of the base and 73.6% of the sales, and their 2% reward can only be spent inside a Costco.

Costco's membership base is not one base. It is two, and the smaller one is the company.

Executive members: share of the base vs share of sales47.8%% of paid memberships73.6%% of worldwide net sales38.7 million of 81.0 million paid memberships at the end of FY2025.
Forty-eight percent of the members produce seventy-four percent of the sales, and they pay double for the privilege. The 2% reward they earn back can only be spent inside a Costco.

Of 81.0 million paid memberships at the end of fiscal 2025, 38.7 million were Executive1 — 47.8% of the count. Those members produced 73.6% of worldwide net sales2. They pay double, $130 rather than $65, and get back a 2% reward on qualified purchases, capped at $1,250 a year, redeemable only inside a Costco.

Read that reward correctly and it is not a discount. It is a device that converts a fee into a deposit. A member spending $10,000 a year earns $200, which is more than the extra $65 the tier costs, so the upgrade pays for itself — but only if they keep shopping, and only if they come back to spend the certificate. Costco has arranged for its best customers to hold a claim on it that can be settled in exactly one place. The accrued member rewards liability was $2,677 million at the end of fiscal 2025 and $2,948 million at the third quarter of fiscal 20263: nearly three billion dollars of pre-committed future trips.

The asymmetry between 48% of members and 74% of sales also explains where Costco's growth actually comes from. Signing a new Gold Star member adds a $65 fee and a modest basket. Converting an existing Gold Star member to Executive adds another $65 of near-pure profit and, on the evidence of the penetration figure, considerably more spending. Costco has repeatedly said upgrades are a priority, and the first thirty-six weeks of fiscal 2026 credited membership fee growth to "new member sign-ups, membership fee increases and upgrades to Executive Membership"4 — the third item being the one it can keep pulling.

Grade it on Executive penetration of worldwide net sales, 73.6%. If it keeps rising while the Executive share of the member count rises with it, the base is deepening. If penetration stalls while the count keeps climbing, Costco is upgrading members who were never going to spend enough to justify it.

Moat trajectory: Widening

Executive membership grew from 32.3 million to 38.7 million in two years and management keeps naming upgrades as a driver. Each conversion adds $65 with no cost of goods.

The number that tests this moat
Reported
Executive penetration of worldwide net sales
73.6%, from 47.8% of paid memberships

Rising penetration alongside a rising Executive share of the count means the base is deepening. Penetration stalling while the count climbs would mean Costco is upgrading members who will not spend enough to justify it.

Source: Costco Form 10-K, fiscal year ended August 31, 2025 ↗
⚠ Threats to the moat
⚠ THREAT 01
The Reward Is a Liability That Grows With Success
Every extra dollar an Executive member spends costs two cents against a fee that does not rise with it.
References
  1. Moat Explorer calcOf 81.0 million paid memberships at the end of fiscal 2025, 38.7 million were Executive — 47.8% of the count.
    Moat Explorer calculation - arithmetic on figures reported in Costco's Form 10-K and Form 10-Q: accounts payable less merchandise inventories ($1,667M at FY2025 and $2,945M at Q3 FY2026), foods and sundries plus fresh foods ($147,552M), Executive memberships over paid memberships (38.7M / 81.0M = 47.8%), accrued member rewards over gross margin dollars ($2,677M / $30,026M = 8.9%), the $1,250 reward cap divided by the 2% rate ($62,500), and Other International revenue as a share of the total — FY2025 and Q3 FY2026 · publ. September 2026 · source ↗
  2. ReportedThose members produced 73.6% of worldwide net sales.
    Costco Form 10-K, fiscal year ended August 31, 2025 - Item 1 Business (membership counts and renewal rates, warehouse and gas-station counts, under 4,000 SKUs, Executive tier and the 2% reward, human capital and wages, competition, Kirkland Signature) — FY2025 · publ. October 8, 2025 · source ↗
  3. ReportedThe accrued member rewards liability was $2,677 million at the end of fiscal 2025 and $2,948 million at the third quarter of fiscal 2026: nearly three billion dollars of pre-committed future trips.
    Costco Form 10-Q, quarter ended May 10, 2026 - condensed financial statements and notes (total revenue $70,527M, operating income $2,815M, diluted EPS $4.93, balance sheet, segment table, 928 warehouses) — Q3 FY2026 and the first 36 weeks · publ. June 3, 2026 · source ↗
  4. ReportedCostco has repeatedly said upgrades are a priority, and the first thirty-six weeks of fiscal 2026 credited membership fee growth to "new member sign-ups, membership fee increases and upgrades to Executive Membership" — the third item being...
    Costco Form 10-Q, quarter ended May 10, 2026 - MD&A (comparable sales +10% and +7% excluding fuel and currency, ticket +7% against frequency +2%, membership fees $1,373M, renewal 92.2% and 89.7%, gross margin 11.04%) — Q3 FY2026 and the first 36 weeks · publ. June 3, 2026 · source ↗
Sources
Generated September 23, 2026