Costco is betting big on a massive global expansion strategy, aiming to open 30 new warehouses annually over the next decade.
Driven by a combined goal to fix overcrowded stores and record-breaking demand, the retail giant is moving into new territories like Port St. Lucie, Florida, while eyeing a 50-50 split between U.S. and international growth. For the American consumer, this could mean shorter lines, better parking and more access to bulk savings as the company tackles “overburdened” locations.
“We tend to look five to 10 years out in terms of our real estate plans, and we would still see a really good roadmap for 30-plus warehouses a year, which is the goal that we have at least achieving 30 new warehouses a year. The goal that we set for ourselves,” Costco CFO Gary Millerchip said during the company’s second-quarter earnings call.
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“If we want to get into some of these inner cities, you’re not going to find 25 acres available for us to go into. So how can we infill in some of these very strong markets, like Los Angeles, New York, different places, with a unique model for Costco that is going to allow us to continue to expand?” CEO Ron Vachris said.
“We’re not only expanding buildings, we’re relocating and we’re also upgrading the insides of a lot of our older warehouses too,” Vachris added. “So we continue to put the money back into the company to drive top-line sales and grow our business globally.”
One of the more notable upcoming expansions is in Port St. Lucie, where years of speculation and endless message board requests have officially resulted in a deal for a brand-new 170,000-square-foot Costco warehouse and gas station, with the city selling the land for the site at $6 million.
While roughly half of the expansion will remain focused on the U.S. market to meet soaring demand, the long-term vision is aggressive for store expansions abroad in countries such as Spain.
“We’re expecting around half, maybe slightly over half, to be in the U.S., and then just around half to slightly under a half to be in the rest of the markets that we operate in. So think of that being Canada, Mexico, Europe, Asia, Australia,” Millerchip said.
With many Costco locations exceeding $300 million to $400 million in annual sales — as noted by former CFO Ron Galanti — the wholesaler is intentionally building new stores near existing high-traffic ones to redirect sales and improve the member experience.
And to move faster, Costco is no longer just building from the ground up, but also refurbishing old structures, including former home improvement stores and international grocers.
“We tend to focus on being our own toughest competitor or finding ways of how can we lower prices and continue to deliver more value,” Millerchip added. “So generally speaking, there’s nothing I would call out that we see an impact to our membership base when we’re competing against different operators in each market.”
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