## Four Decades of Value Creation: Costco's Remarkable IPO Legacy and What It Means for Investors

On December 5, 1985, **Costco Wholesale** (NASDAQ: COST) launched its initial public offering at $10 per share—a decision that would fundamentally reshape the retail landscape. Fast forward to today, and that modest $100 investment would have ballooned to approximately $86,058, representing a staggering 50,858% return after accounting for stock splits over the past four decades.

### The Core Philosophy That Built an Empire

What transformed a fledgling warehouse retailer into a global powerhouse wasn't revolutionary technology or aggressive marketing tactics. Instead, it was a deceptively simple ethos: maintain a disciplined pricing structure with a maximum 14% markup on most products and 15% on private labels. This unwavering commitment to affordability became Costco's defining characteristic and the invisible force driving its long-term success.

The clearest symbol of this philosophy sits in Costco's food court: the $1.50 hot dog combo special, unchanged since the company's founding. While competitors constantly adjusted prices, Costco's leadership refused to compromise, even when commodity costs threatened margins. This resolute stance resonated with consumers in ways that transcended traditional loyalty programs.

### Explosive Growth in Numbers

The trajectory speaks volumes. Costco's first earnings report in January 1986 disclosed $134.5 million in sales—impressive for a two-year-old company that had nearly tripled revenue while achieving profitability. Today, the company generated $65.98 billion in net sales during Q1 2026, an 8.2% year-over-year increase.

Physical expansion has mirrored financial growth. From humble beginnings, Costco now operates 921 warehouses worldwide, with recent additions in Spain and France. Management plans to open 28 new locations in fiscal 2026, each new store averaging $192 million in first-year sales—a remarkable figure that underscores the brand's resilience during a period when traditional retailers face extinction.

The membership base stands at 81.4 million paid members, having grown 5.2% year-over-year, with an extraordinary 92.2% renewal rate in U.S. and Canadian locations.

### Wall Street's Regrets and Missed Opportunities

No story about Costco would be complete without mentioning Warren Buffett's most publicly acknowledged investment mistake. Charlie Munger, Buffett's late partner at Berkshire Hathaway, became so convinced of Costco's model that he accumulated shares without ever selling a single one. Munger famously remarked that he wished everything in America functioned as effectively as Costco.

Yet Buffett overruled his partner. In Q3 2020, Berkshire Hathaway liquidated its 4.3 million shares for $1.3 billion. Within months, Buffett confessed the sale was "probably a mistake." The evidence is damning: those same shares would now be worth approximately $3.66 billion, reflecting the 138% surge in Costco stock over the past five years alone.

### Rewarding Shareholders Through Multiple Channels

Beyond stock appreciation, Costco has prioritized returning capital to shareholders through consistent dividend increases and aggressive buyback programs. The company initiated its first dividend in 2004, paying $0.10 per share. Today, early investors from the 1985 IPO collect approximately $1,329 annually in dividend income alone—a 13x multiplier on their initial investment.

The dividend growth streak now spans 21 consecutive years. Management raised the membership fee from $60 to $65 last year, yet retained members and attracted new ones, demonstrating pricing power and brand equity.

A $4 billion share repurchase authorization approved in January 2023 has already allocated $2.18 billion to buybacks in fiscal 2025, supplementing hundreds of millions deployed in prior years. These buyback programs mathematically increase per-share value by reducing outstanding share counts.

### Why This Matters in Today's Market

While physical retailers collapse around it—Kohl's and Macy's shutter locations as established brands file for bankruptcy—Costco confidently raises prices and expands. This divergence reveals a fundamental truth: strong brand ethos, member loyalty, and operational discipline compound into genuine competitive advantages that transcend industry cycles.

The company's refusal to compromise its core values, even when pressured by quarterly earnings demands, created a virtuous cycle. Members trust the model. Trust drives retention. Retention justifies expansion. Expansion creates scale advantages that reinforce affordability, strengthening the brand ethos further.

Costco's four-decade ascent demonstrates that sustainable wealth creation stems not from financial engineering or speculative tactics, but from building enterprises with clear missions that align company interests with customer interests.