Costco Wholesale, a retail giant renowned for its robust business model, presents an intriguing investment case for Berkshire Hathaway, particularly under the leadership of Greg Abel. Despite Warren Buffett's earlier decision to divest from Costco, a move he later acknowledged as a probable misstep, the company's fundamental strengths – including a powerful competitive advantage, predictable revenue streams from memberships, and prudent management – align seamlessly with the long-term investment philosophy that Berkshire Hathaway typically champions. This confluence of attributes suggests that Abel, overseeing Berkshire's contemporary portfolio, might view Costco as an ideal acquisition.
Warren Buffett's connection with Costco spans decades, with Berkshire Hathaway holding shares for approximately twenty years before their complete sale in 2020. This decision was met with open disagreement from vice chairman Charlie Munger, and in subsequent years, Buffett himself confessed that liquidating Costco shares was likely an error. He observed that Costco's stock value nearly doubled after Berkshire's exit, humorously noting he had "used up" some of his astute investment choices between Costco and Apple. As of the recent March 31 13F filing, Costco is notably absent from Berkshire's investment holdings.
Costco's financial performance underscores its attractiveness. For the third quarter of fiscal year 2026, the company reported a significant increase in net sales, reaching $69.15 billion, an 11.6% rise. Total revenue, including crucial membership fees, climbed to $70.53 billion. Net income also saw healthy growth, increasing to $2.19 billion, or $4.93 per diluted share, up from $1.90 billion and $4.28 per share in the previous year. This upward trend isn't an anomaly; the first 36 weeks of fiscal 2026 demonstrated a 9.6% increase in net sales to $203.37 billion, with net income rising to $6.23 billion, or $14.01 per share, from $5.49 billion, or $12.34 per share.
Further reinforcing this narrative, the July 2026 sales update revealed net sales of $23.12 billion for the four weeks ending August 2, marking a 10.7% year-over-year increase. Comparable sales across the company rose by 8.9%, with the U.S. market seeing a 10.3% jump, and digital sales expanding by 17.7%. Even when excluding the impacts of gasoline sales and foreign exchange fluctuations, comparable sales still grew by 6.6% globally, with U.S. digital sales alone up 18.2%. This consistent growth across both physical and online platforms demonstrates a fundamental strength beyond external market factors.
Costco's true competitive advantage lies in its membership model, characterized by impressive renewal rates of 92.3% in the U.S. and Canada, and 89.8% globally. This indicates that nine out of ten members continue to pay their annual fees, even after recent price adjustments that increased the standard Gold Star membership from $60 to $65 and the Executive membership from $120 to $130. This consistent, high-margin membership income is precisely the kind of dependable cash flow that Buffett has historically favored in sectors like insurance and other subscription-based enterprises.
Under Greg Abel's leadership, Berkshire Hathaway has shown a greater willingness to invest in prominent consumer brands and technology-related companies, especially when the economic rationale is compelling. Costco's current market position – a global warehouse club experiencing double-digit sales growth, expanding e-commerce penetration, and exceptionally high membership retention – aligns perfectly with this refreshed investment framework. The simplicity and effectiveness of Costco's strategy: offering a curated selection of competitively priced goods, fostering positive relationships with both customers and employees, and leveraging economies of scale to maintain low prices while incrementally adjusting membership fees, make it an attractive prospect.
For investors, the key takeaway isn't necessarily a prediction that Berkshire Hathaway will repurchase Costco shares. Instead, it's about recognizing that Costco Wholesale represents the kind of enterprise Abel might prioritize for sustained ownership over the coming decades. With its robust market position, reliable cash flow, and management's dedication to delivering value, Costco stands out as a prime candidate. The fact that Buffett himself acknowledged his past selling decision as a mistake further bolsters the argument that Berkshire's current leadership might be less inclined to overlook such a valuable asset again.
