The genius of Costco is that it barely makes money selling you anything.

Most of Costco's actual operating profit doesn't come from the products on the shelves. It comes from membership fees. The retail operation runs at razor thin margins on purpose. They mark items up only enough to cover the cost of running the stores and move the inventory.

The membership fee is where the money is. It's almost pure profit because the cost of issuing a membership card is basically nothing. Once you've paid the annual fee, Costco's incentive is to give you the best possible prices so you renew. That's why the hot dog is still $1.50 and the rotisserie chicken is still $4.99. Those aren't loss leaders in the usual sense, they're renewal insurance.

The model creates a flywheel. Low prices drive membership growth. More members means more buying power with suppliers. More buying power means lower prices. Lower prices drive more membership growth. Renewal rates sit above 90% in the US.

Q3 just came in with same-store sales up 9.8%. That's an enormous number for a mature retailer in an environment where everyone keeps saying the consumer is stretched. The membership base keeps growing and the renewal rate barely moves.

The only real knock on [Costco](https://www.stoxcraft.com/stocks/cost) is that it's almost never cheap. The market understands this business well and prices it accordingly. The question with a stock like this is rarely whether the business is good. It's whether you're willing to pay the premium the quality commands.

How do people here think about valuation on a business this consistent?