Costco wholesale (NASDAQ: COST) has become a phenomenon. Its differentiated warehouse retail model is incredibly reliable, and Costco continues to experience strong growth. Additionally, it has several growth drivers that make it even more attractive as a stock with huge potential.

However, like everything in life, Costco isn’t perfect. If you’re thinking about buying Costco stock today, you also need to know about a big risk.

Investors and shoppers alike love Costco. It offers rock-bottom prices for its products and is a rare company that can boast low rather than high gross margins. Most retailers make money by raising prices and taking profits. Costco contradictorily tries to offer the lowest possible price and instead makes money from something else – membership fees. Although it looks like a retailer, its business is actually selling memberships.

In the first fiscal quarter of 2025 (ending November 24), sales increased 7.5% year-over-year and comparable sales increased 5.2%. Renewal rates were 92.8% for the United States and Canada and 90.4% worldwide. Membership fee revenue increased 7.8% year-over-year, and paying household member revenue increased 7.6%.

The number of managing members also continues to increase. Executive members pay twice the annual fee of a basic membership — $130 since Costco increased it in September. These members account for 46.8% of paid memberships but 73.1% of revenue.

There is also plenty of room to grow. Costco plans to open about 26 net new stores in 2025, representing slow but steady growth. There are many new opportunities both in the United States and abroad. Although there are already 140 stores in California alone, accounting for nearly a quarter of all U.S. stores, the company opened another just a few weeks ago. With first-day sales of $2.9 million, it was Costco’s busiest opening ever.

Each warehouse is huge and contributes a lot to the whole, which is why Costco can slowly open new stores and still generate so much sales. Although there are only 617 stores in the United States, Costco is the third largest U.S. retailer by sales.

With new stores and new members, it doesn’t look like Costco will be slowing down any time soon. It also pays a growing dividend and sometimes a special dividend, adding to the positive picture.

Costco has been a market-leading stock for decades. It’s a recession-resistant stock, although it was under pressure during the previous bear market as it weathered inflation.

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