Will Costco's worldwide membership renewal rate drop below 88% by Q4 FY2026?

The arithmetic is straightforward: at the established ~20bps/quarter decline rate, the worldwide renewal rate would reach approximately 89.1% by Q4 FY2026 — still 110bps above the 88% threshold. To breach 88% within 2-3 quarters requires a 3-4x acceleration in the decline rate. The committee found no evidence supporting such acceleration. The fee increase (Sep 2024) was absorbed with only ~100bps decline — a positive stress test. Member count is still growing +5.2% and Executive penetration rising +9.1%, both counter-indicators to a membership crisis. The unresolved debate about whether decline is mix-driven (digital sign-ups) vs satisfaction-driven adds tail risk, but even if satisfaction-driven, acceleration to 57-85bps/quarter would require a structural shock not present in the evidence base.

The key question is whether there is a plausible mechanism for accelerated decline. The committee identified three risk factors: (1) unverifiable digital-mix explanation, (2) international expansion shifting mix toward lower-renewal markets, and (3) theoretical self-reinforcing membership decline dynamics. However, none of these are sudden-onset mechanisms. International expansion is gradual and has been ongoing throughout the period where renewal rates were 90%+. Digital sign-ups are a secular trend that would also be gradual. A self-reinforcing spiral requires crossing a tipping point, and at 89.7% with growing member counts, this threshold is nowhere close. The only scenario for YES would be an exogenous shock — major recession, food safety crisis, or a competitor disruption — which the Black Swan Beacon rated as low probability. I assign ~8% to capture genuine tail risk.

I want to stress-test the linear extrapolation assumption. The decline from 90.5% to 89.7% over 4 quarters (~20bps/quarter) is the base case. Could Q2 FY2026 (the next data point, March 2026 earnings) reveal a steeper decline? Even if Q2 shows a 40bps quarterly drop (double the recent rate), that would put worldwide renewal at ~89.3%. Then even another 40bps in Q3 would yield 88.9%, and 40bps in Q4 yields 88.5% — still above 88%. To breach 88% even with a doubled decline rate, you'd need 5+ quarters from now. The only path to YES requires a >50bps/quarter sustained acceleration starting immediately, which would be unprecedented for Costco and would require a structural event. CEO and CFO accumulating shares further suggests insiders see no crisis. Probability is very low but not negligible given the unverifiable nature of management's explanation.

This is essentially a math question. The renewal rate is 89.7%, declining at ~20bps/quarter, and needs to drop below 88% within 2-3 quarters. Linear extrapolation gives ~89.1% at the resolution date. You need nearly triple the decline rate with zero evidence supporting acceleration. Member count is growing, executive penetration is rising, and the fee increase was absorbed cleanly. The cross-lens consensus is that renewal rate is a monitoring concern at current trajectory but nowhere near trigger levels in this timeframe. This resolves NO with high confidence.

The committee flagged renewal rate as the most important leading indicator across all 7 lenses, but the question is specifically about breaching 88% in 2-3 quarters — not whether the trend is concerning. At the current trajectory, 88% is approximately 7-8 quarters away, not 2-3. The only scenario for YES is a sudden discontinuity: a competitive shock from Amazon/Sam's Club, a food safety incident, or an economic recession sharp enough to make households cut a membership that saves them money on bulk purchases. Each of these is individually low-probability in a 6-8 month window, and even in recession scenarios, discount retailers historically see flat-to-increased membership as consumers trade down. I add a small probability for unknown unknowns.

The data is unambiguous. Even the committee's most concerning finding — the ASSUMPTION_FRAGILITY = CONCENTRATED assessment from Black Swan Beacon — pertains to long-term thesis risk, not near-term renewal rate collapse. The Myth Meter's DIVERGING narrative-reality gap flags that the 'sticky membership' story is being tested by the declining trend, but 89.7% is still objectively very high. Management's digital-mix explanation, even if partially covering for satisfaction issues, describes a gradual structural shift. The probability of a 170bps collapse in 2-3 quarters is extremely low without an identified catalyst. I rate this at 4%.

Simple math: 89.7% now, declining 20bps/quarter, need to reach <88% in 2-3 quarters. Expected rate at resolution: ~89.1%. Buffer is 170bps but only ~40-60bps of decline expected. Would need 3x acceleration with no evidence supporting it. Very unlikely.

The committee consensus is clear: renewal rate decline is a long-term monitoring concern, not an imminent crisis. Fee increase was absorbed with minimal churn. Executive member penetration growing +9.1% YoY signals deepening engagement. International mix shift is gradual. Resolution is too soon for the 88% threshold to be breached at current or even modestly accelerated rates.

At 20bps/quarter decline, reaching 88% takes 8.5 quarters. Resolution window is 2-3 quarters. The math doesn't support YES. Even doubling the decline rate to 40bps/quarter would only reach ~88.9% in 2 quarters. Insiders accumulating shares. Very low probability — only exogenous black swan event could trigger this.