HOME

FA Alpha Daily

This retail giant is having its own “Netflix moment”

Costco (COST) is seeing a surge in membership growth with the rollout of card scanners across U.S. stores, similar to Netflix’s password-sharing crackdown success. Coupled with an upcoming fee hike, this initiative positions the retailer for strong revenue growth. In today’s FA Alpha Daily, we explore how these strategies are shaping Costco’s financial future.

FA Alpha Daily
Powered by Valens Research

Netflix (NFLX) made headlines earlier this year by cracking down on password sharing, a move that has led to a surge in its subscriber base. 

After implementing measures to limit account sharing, Netflix added over 9 million subscribers in just one quarter, showing how effectively it converted non-paying viewers into paying customers.

This move has been a game-changer for Netflix, allowing the company to focus on diversifying its revenue streams through advertising and live programming.

Similarly, Costco (COST) is experiencing its own “Netflix moment” with the rollout of membership card scanners in its U.S. stores.

Initial tests of the card scanners showed a double-digit increase in membership counts at select Costco locations.

The increase in paying members was largely attributed to the fact that non-fee-paying customers were now required to have their own membership cards to make purchases, leading to a conversion boom.

These card scanners are not just a test, Costco plans to implement them at all its U.S. clubs. 

Analysts suggest that the retailer could add an additional 4 million members through this initiative, which would result in a ~5% increase to its total worldwide membership base of approximately 76 million. 

This potential membership boost, combined with its already planned membership fee hike, could significantly bolster Costco’s fee income in the coming quarters.

Costco is already poised for a financial uplift due to an impending increase in its annual membership fees. 

This fee hike is expected to enhance operating profits, with the most substantial impacts anticipated within the next 24 months. The gradual implementation of these increases will peak around the first half of 2026.

Costco’s recent quarterly results also reveal strong traffic growth, which has been a major contributor to its same-store sales performance. 

The company reported a 6.9% increase in same-store sales, supported by a 9.6% year-over-year rise in memberships. 

This indicates that more consumers are turning to Costco for their shopping needs, particularly amid economic pressures such as high inflation and rising interest rates.

As Costco continues to adapt to market conditions and consumer preferences, it appears well-equipped to leverage its unique business model for sustained success in the retail sector.


Best regards,

Joel Litman & Rob Spivey
Chief Investment Strategist &
Director of Research
at Valens Research

To see our best macro insights, become an FA Alpha and get access to FA Alpha Pulse.

Subscriptions & Services

Please fill out the fields below so that our client relations team can contact you

Or contact our Client Relationship Team at +1 630-841-0683