Costco Wholesale (COST) receives Old York Operational Quality (AAA) Rating for fiscal year 2025
(AAA) | Consumer Defensive | Discount Retail
By: Old York Financial
A Private Principal Research Report
the verdict
Old York Financial has assigned Costco Wholesale (COST) an Operational Quality (AAA) Rating. Costco is the premier example of "Shared Economies of Scale." By selling goods at a near-zero margin and capturing profit almost entirely through Membership Fees, Costco has built an unbreakable moat. In fiscal 2025, total revenue hit a record $275.2 Billion, while membership fees surged 10.3% to $5.3 Billion. It is a (AAA) entity because it combines Sovereign-tier efficiency (30% ROIC) with a "Cash-Fortress" balance sheet that carries more cash than debt.
the old york analysis
owner earnings: the membership surplus Costco’s net income is essentially the membership fees, as merchandise sales merely cover the cost of operations.
2025 Reported Net Income: $8.10 Billion
(+) Depreciation & Amortization: ~$2.43 Billion
(–) Maintenance CapEx (est.): (~$1.90 Billion)
= OLD YORK OWNER EARNINGS: $8.63 Billion
Analyst Note: While total CapEx was $5.5 Billion in 2025, over 65% of that was Growth CapEx (24 net new warehouses and manufacturing expansion). For a principal, the "Maintenance" cost to keep the existing 914-warehouse network running is remarkably low, allowing the business to generate massive surplus cash while simultaneously expanding.
growth & market dominance
Total Revenues (2025): $275.2 Billion (Up 8.1%).
Membership Fee Income: $5.32 Billion (Up 10.3%).
Membership Renewal Rate: 92.3% (US & Canada).
Analyst Note: The September 2024 fee increase (the first in 7 years) flowed straight to the bottom line in 2025. With 81.4 Million paid members, Costco isn't just a retailer; it’s a subscription-based utility that people pay for the privilege of using.
operational efficiency
Adjusted ROIC (Return on Invested Capital): 30.6%.
Old York Standard: A (AAA) typically requires >15%.
Analyst Note: Costco’s 30%+ ROIC is triple that of most retailers. It achieves this through Inventory Velocity. Costco turns its entire inventory ~13 times a year. Essentially, they sell the goods to the customer before they’ve even paid the supplier. They are funded by their own supply chain.
the fortress check
Pricing Power: REVERSE (The "Munger" Moat). Costco’s pricing power is its ability to lower prices. Every time they get a better deal from a supplier, they give it to the member. This creates a psychological lock-in that makes the 92% renewal rate permanent.
The "Kirkland" Moat: Kirkland Signature now represents $90 Billion in annual sales. By owning the brand, Costco controls the margin and the quality, preventing national brands from ever gaining leverage over them.
Solvency: SOVEREIGN. Costco holds $14.2 Billion in cash against just $5.7 Billion in long-term debt. It has a negative Net Debt-to-EBITDA. It is a financial fortress that requires zero outside capital to exist.
final determination
Rating: Old York Quality (AAA)
Classification: The Sovereign Shared-Scale Monopoly. Costco is a perfect business. It receives a (AAA) because it possesses the rarest combination in finance: high growth, zero net debt, and an elite 30% ROIC. For a principal, Costco represents the ultimate "Sleep Well at Night" asset. It is the gold standard by which all other retailers are measured.
Disclaimer: Old York Financial operates privately as a principal and sells corporate advisory. Old York Financial is not an accountant, a financial advisor, a broker, an agent, a lawyer, or a portfolio manager. This report is for informational purposes only.
