Lesson 2 of 8
The revenue driver
Costco's revenue is warehouses times sales per warehouse, plus members times fee per member. Both halves are disclosed, and only one of them has a cost line.
By Javier Sanz
Founder of ValueScreener. Built Ninety Nine, a securities services provider, and sold it to a tier-one global bank; ran operations and internationalization at Alpaca, the brokerage API.
Who writes thisEditorial processLinkedIn (opens in a new tab)X (opens in a new tab)
In one minute
- Forecasting revenue as a growth rate hides the assumption; forecasting it as a count times an amount per unit exposes it.
- Costco operated 914 warehouses at 31 August 2025 and 890 a year earlier, and net sales of 269,912 million dollars work out at 299.2 million per average warehouse.
- The second revenue line is membership fees, 5,323 million dollars, which is 81.0 million paid members at about 67.72 dollars each.
A revenue forecast of 6 percent contains one assumption you cannot inspect. The same forecast built as a warehouse count times sales per warehouse contains two you can, and each has a source in the filing.
Build the revenue line from what the filing counts
- Take the physical unit and its count. Costco operated 914, 890 and 861 warehouses worldwide at 31 August 2025, 1 September 2024 and 3 September 2023.
- Compute the average count for the year, because a warehouse opened in month nine sells for a quarter of the year. For fiscal 2025 that is 902.
- Divide net sales by it. 269,912 million dollars over 902 gives 299.2 million dollars of net sales per average warehouse.
- Repeat for the prior year: 249,625 million over an average of 875.5 gives 285.1 million, so sales per average warehouse rose 5.0 percent.
- Take the second revenue line on its own terms. Paid members were 81.0 million, 76.2 million and 71.0 million at the three year ends.
- Divide membership fees by the average paid membership. 5,323 million dollars over an average of 78.6 million members is about 67.72 dollars a member, against 65.60 the prior year.
Two revenue lines, two different units
| Driver | FY2025 | FY2024 |
|---|---|---|
| Warehouses at year end | 914 | 890 |
| Average warehouses in the year | 902 | 875.5 |
| Net sales per average warehouse, in millions | 299.2 | 285.1 |
| Paid members at year end, in thousands | 81,000 | 76,200 |
| Membership fee per average paid member, in dollars | 67.72 | 65.60 |
What the split buys you
Two assumptions instead of one, each with a different character. The warehouse count is a plan the company describes and a reader can track quarter by quarter. Sales per warehouse is an economic question about the existing estate, and the filing gives a second reading of it: comparable sales, which for fiscal 2025 were 6 percent for the total company and 7 percent in the United States excluding the effects of currency and gasoline prices.
Those two readings should roughly agree. If your sales-per-warehouse assumption implies something far from the disclosed comparable sales figure, one of them is wrong and you can see which before the model is built.
Why the fee line is separate
Membership fee revenue rose 10 percent in fiscal 2025. The filing states that the annual fee increase in the United States and Canada, effective 1 September 2024, accounted for approximately 40 percent of membership income growth in the year, which means roughly 60 percent came from members joining.
So this line is a price assumption and a volume assumption too, and both are disclosed. It is also recognised on a deferred basis, ratably over the one-year membership period, which is why the balance sheet carries deferred membership fees of 2,854 million dollars against 2,501 million a year earlier.
The trap in a physical driver
The unit has to be one the company actually adds. Counting square footage instead of warehouses is defensible; counting employees is not, because headcount follows sales rather than driving them. The test is whether the company decides the number in advance, and a warehouse opening plan is decided years ahead.
Check yourself
Why use average warehouses rather than the year-end count?
- Because the year-end count is unreliable
- Because a warehouse opened part-way through the year sells for only part of it
- Because the standards require an average
Show the answer
Answer: B.
Dividing a full year of sales by a year-end count that includes locations open for one month overstates the count and understates sales per warehouse.What does the filing say drove membership fee growth in fiscal 2025?
- Entirely the fee increase
- The fee increase effective 1 September 2024 accounted for approximately 40 percent of the growth, with the rest from new sign-ups
- Entirely new sign-ups
Show the answer
Answer: B.
The 10 percent increase splits into a price effect the filing sizes at about 40 percent and a volume effect making up the rest.What makes a physical driver a good one?
- That it is easy to count
- That the company decides it in advance, rather than it following from sales
- That it appears in the audited statements
Show the answer
Answer: B.
A warehouse opening plan is decided years ahead and drives sales. Headcount follows sales, so forecasting sales from it is circular.Sources
- Costco Wholesale Corporation, Form 10-K for the fiscal year ended 31 August 2025, filed 2025-10-08, accession 0000909832-25-000101: warehouse counts, paid membership and cardholder counts, net sales, membership fees, comparable sales and the deferred membership fees balance.
- ASC 606, Revenue from Contracts with Customers, for the ratable recognition of a membership fee over the membership period.
What this leaves out
- Sales per average warehouse and fee per average member are this course's arithmetic on reported figures, not measures the company publishes. Average counts are simple two-point averages, which is an approximation to the timing of openings within the year.
- The membership counts include memberships that have expired and not renewed within the twelve months before the reporting date, as the filing states.
- The three-row callout is this course's arithmetic on disclosed figures; only the first row is what happened.
- Nothing here is a view on Costco or on any security.