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Investing.com -- Fitch Ratings has assigned Costco Wholesale Corporation a ’AA’ Long-Term Issuer Default Rating (IDR) with a stable outlook, reflecting the retailer’s significant scale and durable membership business model.
The rating applies to Costco’s IDR and unsecured notes, recognizing the company’s $275 billion in revenue and $13.5 billion in EBITDA for fiscal year 2025, which ended in August.
Fitch highlighted Costco’s position as the third-largest U.S. retailer, operating 914 warehouses and serving 145 million member cardholders with membership retention rates averaging near 90%. The company’s membership revenue totaled $5.3 billion in FY25.
The ratings agency projects Costco will achieve annual revenue growth of approximately 5% through warehouse openings and product enhancements, indicating continued market share gains. Fitch expects EBITDAR leverage to remain between recent levels and the low-1x range, even accounting for occasional debt-financed special dividends.
Costco’s strong cash flow generation is a key factor in the rating, with projections of over $3 billion in free cash flow annually after regular dividends of around $2.5 billion over the next two to three years. The company currently holds over $15 billion in cash and short-term investments.
The retailer’s EBITDAR leverage has averaged about 1x over the past five years and decreased to 0.7x in FY25 following EBITDA growth and some debt reduction. Fitch’s rating assumes leverage will remain below 1.5x.
Fitch compared Costco to other major retailers, noting that Walmart holds an identical ’AA’ rating despite its significantly larger scale, while Amazon.com has a slightly lower ’AA-’ rating despite its leading positions in e-commerce and cloud computing.
Looking ahead, Fitch expects Costco to expand revenue by 4% to 6% annually through 3% to 5% comparable store sales growth and 25-30 new locations per year. The company’s revenue could surpass $300 billion in fiscal 2027.
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