The stock fell in line with the broad market when inflation spiked in 2022.

Inflation may have cooled off from its peak of around 9% in 2022, but the beast has not been fully tamed.

The Federal Reserve is aiming for a 2% inflation rate, and the central bank has resisted lowering interest rates further until it sees evidence that inflation will reach its goal of 2%. That could become more difficult as a new round of tariffs is set to be implemented after President Donald Trump's Aug. 1 deadline passed with some nations, like Canada, receiving rate hikes.

As of June, the consumer price index was 2.7%, while core CPI, which strips out the volatile food and energy categories, held at 2.9%, according to research from The Motley Fool.

The inflation rate holds implications for the stock market as a whole and for nearly every sector within it. However, few are affected as much as the retail industry. Consumer prices directly affect demand, and higher prices can drive away consumer spending, especially in discretionary categories. Alternatively, some retailers and consumer packaged goods companies can use inflation to pass along higher prices, expanding their profit margins.

One popular retailer to watch with inflation still volatile is Costco Wholesale (NASDAQ: COST), one of the world's biggest retailers by revenue.

Costco's differentiated business model helps protect the retailer from inflation in some ways. First, because of its membership model, Costco's business isn't as sensitive to consumer prices as peers like Walmart and Target might be.

In fact, the company makes a large percentage of its profit from membership income. Its customers pay a base price of $65 a year for the privilege of buying its bulk goods at near cost. The profit it makes from retail sales is comparable to what it makes from membership income. In its most recent quarter, for example, it generated $1.24 billion in membership income, which made up nearly half of its $2.53 billion in operating income.

Since Costco enjoys a substantial membership-based revenue stream, inflation is less of a risk for the company as that membership income should be protected from inflation. Additionally, its customers have already paid to be able to shop there in part because of Costco's low prices.