Why Vanguard Just Bet $43 Billion on Costco (It Is Not The Hot Dogs)
[HPP] Ron VachrisFebruary 17, 202617 min
35 connections·40 entities in this video→Costco's Unique Business Model
- 💡 Costco operates as a subscription hack, generating substantial profit primarily from membership fees, rather than traditional retail markups.
- 🎯 In Q1 2026, Costco collected $1.3 billion in membership fees, which flows almost entirely to the bottom line as pure profit.
- 🔑 The company caps its gross merchandise margin at 11-14%, often selling goods at near break-even or a slight loss to maintain low prices and drive membership value.
- 📈 Costco benefits from negative working capital, selling inventory and collecting cash from customers before paying its suppliers, effectively investing with supplier money.
- ✅ Membership renewal rates are exceptionally high, reaching 92.2% in the US and Canada, demonstrating strong customer loyalty and a significant
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Transcript64 segments
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What’s Discussed
CostcoVanguard GroupMembership feesNegative working capitalExecutive membershipDigital expansionPrecious metalsAI exuberanceDot-com bubbleHigh-quality US bondsValue investingGrowth stocksBarbell strategyCorporate governanceSpecial dividends
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