Costco Wholesale (BA) reported another quarter of strong profits and revenue, but its stock slipped as investors focused on slowing same-store sales growth. The retail giant continues to prove its resilience, though questions about its lofty valuation are resurfacing.
Key Points
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Costco posted adjusted earnings of $5.87 per share on $86.2 billion in revenue, topping Wall Street expectations.
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Same-store sales rose 5.7%, slightly below forecasts, marking the second straight quarter of slower growth.
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Membership income surged 14%, with e-commerce sales climbing 13.6%, showing strength in digital channels.
Why did Costco stock drop after an earnings beat?
Costco’s earnings per share and revenue both beat forecasts, yet the stock fell over 2% after the release. Why? The culprit was slower same-store sales growth. These sales, which measure performance at existing stores, increased by 5.7%, shy of the 5.9% analysts expected and well below last year’s 6.9%.
Investors tend to punish Costco more harshly than other retailers when growth slows because the stock trades at a premium — about 47 times forward earnings, far higher than most of its retail peers. With such a lofty valuation, even small disappointments can trigger pullbacks.
What’s driving Costco’s growth?
Despite the slowdown, Costco showed plenty of strengths:
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Membership growth: Membership fee income jumped 14% to $1.72 billion. Renewal rates remain strong, with U.S. and Canada at over 92%. Executive memberships now make up nearly three-quarters of sales.
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E-commerce momentum: Online sales grew 13.6%, with big gains in categories like gold, jewelry, and apparel. Costco has also leaned on delivery partnerships with Uber Eats and Instacart.
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Global expansion: The retailer opened 27 new warehouses in fiscal 2025 and plans to open 35 more in 2026. Costco now operates 914 warehouses worldwide.
Even classic Costco staples continue to play a role in customer loyalty. CFO Gary Millerchip highlighted that in 2025 the company sold over 245 million hot dog combos and 157 million rotisserie chickens — iconic bargains that help drive consistent foot traffic.
How does Costco compare to rivals like Walmart and Amazon?
Same-store sales growth at Costco came in higher than Walmart’s (WMT) recent 4.6% U.S. growth, but competition is intensifying. Walmart-owned Sam’s Club grew comps by 5.9%, and Amazon’s (AMZN) same-day delivery rollout has weighed on Costco and other discount retailers.
Costco’s strength lies in its membership model, which provides predictable recurring revenue. Analysts see this as a buffer against economic uncertainty. Still, rivals are moving aggressively into delivery and digital convenience, areas where Costco is improving but still catching up.
What it means for investors
Costco continues to deliver steady earnings growth, robust membership income, and healthy e-commerce expansion. However, its high valuation makes the stock sensitive to any slowdown in same-store sales.
For long-term investors, Costco remains one of the strongest players in retail, with a loyal customer base and global growth opportunities. But near-term, the stock may be vulnerable to volatility unless comps accelerate or management announces a catalyst like a special dividend or stock split.
Conclusion
Costco’s latest results highlight both the resilience of its business model and the challenges of living up to sky-high investor expectations. Earnings and revenue continue to shine, but slowing same-store sales keep the stock in check. For investors, Costco remains a high-quality name — but one where patience and price discipline may be key.
FAQs
Why did Costco stock go down after beating earnings?
Costco shares fell because same-store sales growth of 5.7% came in below expectations, disappointing investors given the company’s premium valuation.
Is Costco stock overvalued?
At roughly 47 times forward earnings, Costco trades well above the retail sector average. Investors pay this premium for consistency and loyalty-driven growth, but it leaves little margin for error.
How does Costco compare to Walmart and Amazon?
Costco outperformed Walmart’s U.S. sales growth but trails Amazon on delivery speed and digital convenience. Sam’s Club remains its closest competitor, posting a 5.9% same-store sales increase.
What drives Costco’s growth long-term?
Membership income, global expansion, and e-commerce growth are the key drivers. The company is also expanding into new categories while keeping its reputation for unbeatable value on staples like its $1.50 hot dog combo.
Is Costco a good stock to buy right now?
Costco remains a strong long-term story, but its high valuation means the stock could see short-term pressure. Investors may want to wait for pullbacks before adding shares.