COST Thesis Assessment

At 6% probability with the highest model agreement in the set (0.97), the ensemble is near-unanimous that membership renewal will remain well above 88% through FY2026. This is the single most important de facto positive finding: the foundational assumption underpinning COMPETITIVE_POSITION, REVENUE_DURABILITY, UNIT_ECONOMICS, and NARRATIVE_REALITY_GAP assessments appears secure for the assessment horizon. The current ~20bps/quarter decline trajectory would require 7-8 quarters to approach 88%, and the ensemble clearly expects stabilization or deceleration of the decline. This market effectively rules out the most catastrophic downside scenario for the business model itself.

At 55% probability, the ensemble expects — more likely than not — that healthcare costs will continue exceeding sales growth through Q3 FY2026, establishing a structural margin headwind. This is the most thesis-informative market in the set because it directly challenges the EXCEEDING operational execution assessment that supports the premium valuation. If realized, the 3+ quarter healthcare cost trend would pressure the narrative that Costco can simultaneously grow revenue at 8%+ and expand margins — the dual requirement embedded in a 54x P/E. The 55% is not overwhelming, but paired with the SG&A leverage market at 50%, it creates a probability-weighted expectation that margin headwinds are the central near-term challenge.

At 28% probability, the ensemble assigns a meaningful — roughly 1-in-4 — chance that Costco's valuation multiple will compress below 45x during 2026. This market is unusual in that its direction is de-escalate (compression would reduce the DEMANDING expectations burden), but the path to get there would likely involve a significant stock price decline. At the current ~$985 price and estimated ~$18.25 trailing EPS, P/E is approximately 54x. Reaching 45x via EPS growth alone would require EPS of ~$21.90 (20% growth) — plausible but at the upper bound. Reaching 45x through price decline to ~$821 represents a 17% drawdown. The 28% probability suggests the ensemble sees this as a material possibility driven by multiple compression risk, which is the Myth Meter's identified weakest link in the investment case.

At 13% probability, the ensemble strongly expects that Congress will NOT pass broad tariff legislation above 15% before Section 122 expires. This effectively assigns 87% probability to the tariff regime remaining at or below the current 10-15% level through mid-2026. For Costco, which imports approximately one-third of US sales, this is a meaningful positive: the Black Swan Beacon's 'Margin Vise' scenario (20-25% permanent tariffs creating $4.5-6.5B in incremental cost pressure) appears unlikely in the near term. However, the 13% is not negligible — it represents a tail scenario where Congressional action could transform Costco's cost structure in a way that the current price does not discount.

At 17% probability, the ensemble expects Costco's 3-year gross margin expansion trend (12.26% to 12.85%) to hold above the 12.5% threshold despite tariff pressures. This supports the Moat Mapper's assessment that Costco's buying power advantage is intact and the cost advantage moat trajectory is 'stable, leaning widening.' However, the 17% is not trivial given the thin 35bps buffer and the new Section 122 tariff regime. If gross margin does compress below 12.5%, it would reverse the positive trajectory that underpins COMPETITIVE_POSITION and UNIT_ECONOMICS assessments, potentially triggering a narrative shift on Costco's margin story.

At 57% probability with the lowest model agreement in the set (0.84), this is the most uncertain market. The slight lean toward expiry without replacement is positive for Costco — it would remove the primary cost pressure threatening gross margin expansion and de-escalate REGULATORY_EXPOSURE from MANAGEABLE toward MINIMAL. However, the 0.84 model agreement indicates genuine disagreement among models about the political dynamics of trade policy post-SCOTUS. The 43% probability of tariff replacement or extension means the regulatory environment remains a live variable. The low agreement makes this market less thesis-decisive than its aggregate suggests — the models themselves are uncertain about the direction of trade policy.

At exactly 50% — the maximum-uncertainty point — with high model agreement (0.94), the ensemble is precisely split on whether Costco's SG&A deleverage extends to 4+ quarters. The high agreement at the midpoint means models are converging on genuine uncertainty rather than disagreeing about direction. Combined with the 55% healthcare cost market, these two markets create a joint probability-weighted expectation that margin pressures are real and persisting. If the SG&A leverage failure extends to 4+ quarters despite strong comp sales, it would indicate structural SG&A limits rather than deliberate investment — shifting OPERATIONAL_EXECUTION from EXCEEDING toward MEETING and weakening a pillar of the premium valuation case.

At 11% probability with the joint-highest model agreement (0.97), the ensemble strongly expects USDA will not take formal enforcement action against LPP in 2026, despite 7 years at the worst FSIS rating and consistent monthly salmonella test failures. This low probability reflects the historical pattern of FSIS rarely taking formal enforcement action against major producers. The thesis contribution is primarily in what it rules out — the Black Swan Beacon's 'Compound Regulatory Crisis' scenario appears unlikely. However, the consensusFragile flag indicates that minority model scenarios see a path to enforcement that the majority discounts, potentially through increased political attention to food safety or the pending class action litigation creating pressure for FSIS action.