Inventory Turnover › Costco
Costco Inventory Turnover: Best-in-Class Case Study
Costco Wholesale Corp (COST) reported 13.0x inventory turnover in fiscal 2025 (year ended August 31, 2025), up from 12.6x in FY24. That is the highest among general-merchandise mass retailers in the US. The result is structural; not a fortunate accident. All figures from the company 10-K filings on SEC EDGAR.
Quick answer: Costco's fiscal 2025 and 2024 10-K inventory turnover ratio
Fiscal 2025 (10-K)
13.0x for the year ended August 31, 2025. $239.9B merchandise costs over roughly $18.38B average inventory ($18.65B opening, $18.12B closing). Best-in-class among US mass retailers.
Fiscal 2024 (10-K)
12.6x for the year ended September 1, 2024. $222.4B merchandise costs over roughly $17.65B average inventory.
Turnover = COGS (merchandise costs) / average inventory (mean of opening and closing balance-sheet inventory). Figures taken from Costco's 10-K filings on SEC EDGAR (CIK 0000909832), verified July 2026.
FY22 - FY25 turnover history
| Fiscal Year | COGS | Inv (start) | Inv (end) | Turnover |
|---|---|---|---|---|
| FY22 (ended Aug 2022) | $199.4B | $14.22B | $17.91B | 12.4x |
| FY23 (ended Sep 2023) | $212.6B | $17.91B | $16.65B | 12.3x |
| FY24 (ended Sep 2024) | $222.4B | $16.65B | $18.65B | 12.6x |
| FY25 (ended Aug 2025) | $239.9B | $18.65B | $18.12B | 13.0x |
Three structural advantages
1. SKU rationalisation (~4,000 SKUs per warehouse)
Costco disclosed in their FY24 annual letter that the typical warehouse carries approximately 4,000 SKUs. By comparison, a Walmart Supercenter carries 120,000+ and a Target store 80,000+. Fewer SKUs at higher unit volume each means deeper buying power per item, larger pallet shipments, and lower per-SKU safety stock.
2. Vendor-shipped pallet logistics
Costco buys in full container or pallet loads. Vendors ship direct to warehouse where pallets are floor-displayed without unpacking. There is no back-room safety stock for fast movers, and no in-store handling labour for SKU build-up. Vendor lead times feed the merchandising calendar directly; Costco does not absorb the gap.
3. Membership-driven demand predictability
Costco runs on annual paid memberships. 90%+ renewal rates in the US disclosed in the 10-K. A known customer base with stable shopping cadence produces forecast accuracy materially higher than the open-public mass retailer comparison. Higher forecast accuracy means lower required safety stock for the same fill rate.
Negative cash-conversion cycle
Costcos high turnover combines with vendor payment terms to produce a negative cash-conversion cycle (CCC). At approximately 13x turnover, DSI is roughly 28 days. With DSO near 0 (members pay at checkout) and DPO at ~30-40 days (vendor payment terms), the CCC is negative.
A negative CCC means Costco gets paid by customers before paying vendors. The float finances inventory growth at zero capital cost. This is one of the cleanest balance-sheet expressions of an operating moat in retail.
What stops other retailers replicating this
Each of the three advantages is structurally tied to Costcos format and customer:
- SKU rationalisation requires accepting narrow assortment. Customers who want 7 ketchup brands shop at Kroger.
- Pallet logistics require warehouse-style locations (high ceilings, forklift aisles). Traditional supermarkets cannot retrofit.
- Membership model requires a value-driven brand promise customers will pay upfront for. Sams Club is the only US peer with comparable scale; BJs is third.
These are not management-effort variables. They are organisational design choices baked in for forty years. The takeaway for benchmarking: comparing your turnover to Costcos is informational only. Comparison to Walmart, Target, or Kroger is more actionable.
Frequently asked questions
What is Costco's inventory turnover ratio in fiscal 2025?
Costco turned its inventory 13.0x in fiscal 2025, the year ended August 31, 2025. That is $239.9B of merchandise costs divided by roughly $18.38B average inventory (the mean of the $18.65B opening and $18.12B closing balances) from its 10-K. It is the highest turnover among general-merchandise mass retailers in the US.
What was Costco's inventory turnover in fiscal 2024?
Costco's inventory turnover was 12.6x in fiscal 2024 (the year ended September 1, 2024), on $222.4B merchandise costs over roughly $17.65B average inventory. It then rose to 13.0x in fiscal 2025 as sales grew while inventory edged lower.
How is Costco's inventory turnover calculated from the 10-K?
Divide merchandise costs (Costco's cost of goods sold) by average inventory, where average inventory is the mean of the opening and closing merchandise-inventory balances for the fiscal year. Both figures come straight from Costco's 10-K on SEC EDGAR (CIK 0000909832); Costco tags COGS as Cost of Goods and Services Sold in its XBRL data.
Why is Costco's inventory turnover so high?
Three structural factors: a narrow assortment of roughly 4,000 SKUs per warehouse (versus 120,000+ at a Walmart Supercenter), vendor-shipped pallet logistics that skip back-room safety stock, and membership-driven demand predictability with 90%+ US renewal rates. Together they let Costco hold far less inventory per dollar of sales than a conventional retailer.