Costco Wholesale (COST) has fallen roughly 15% from its mid-February all-time highs, while Walmart (WMT) is down only about 3% and the S&P 500 (SPX) has gained 12% over the same period. I view this pullback as a compelling opportunity to buy into one of the most durable and well-managed retailers in the world.
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With about 910 warehouse clubs across 14 countries, Costco continues to attract a loyal, value-driven customer base. Its model—built on low prices, strong membership retention, and operational efficiency—positions the company to keep expanding its market share even in a challenging consumer environment.
I’m bullish on Costco at these levels, supported by its unmatched value proposition, accelerating U.S. comparable sales, and solid execution in non-food categories. In a period when consumers are becoming more cost-conscious, Costco’s combination of quality, price discipline, and scale gives it a unique edge to outperform.
Consistent Sales Growth and Market Share Gains
Costco’s latest monthly sales results underscore its operating strength. For September, U.S. comparable sales rose 5%, building on a 9.3% gain from the same period last year. Two-year comparable sales trends accelerated to +14.3%, showing improving momentum from August (+13.4%) and July (+12.8%).
Category performance remained broad-based, with food and sundries up mid-single digits, fresh foods up mid- to high-single digits, and non-foods up high-single digits. Ancillary businesses, including fuel, optical, and pharmacy, also posted mid-single-digit growth.
These results reinforce Costco’s ability to maintain traffic growth and wallet share across key categories, even as lower-income consumers reduce their spending elsewhere. With household budgets under pressure, Costco’s competitive pricing and premium product mix continue to attract both loyal members and new shoppers.
Strong Value Proposition and Resilient Margins
Costco’s business remains one of the most defensible in retail, supported by its membership model and unmatched scale efficiencies. The company has gained share across virtually all retail segments—from grocery and big-box competitors to online pure plays—and benefits from some of the highest barriers to entry in the industry.
Notably, Costco’s operating margins have expanded for 10 consecutive quarters, reaching 3.77%, above the long-term average of 3.49%. In retail, this level of consistency is exceptional. The margin trajectory reflects disciplined cost control, mix improvements in higher-margin non-food categories, and leverage of membership fees.
Meanwhile, operating expenses have crept up since 2020, with the most recent earnings call highlighting robust sales and e-commerce growth, thereby offsetting these expenses. The planned expansion of 28 new warehouses and wage increases may further elevate costs, but strategic growth initiatives and strong membership fee income provide a buffer.
While the upcoming months could bring short-term volatility from factors such as potential food stamp (SNAP) disruptions tied to the government shutdown, I view any weakness as temporary. Costco’s customer base skews toward higher-income consumers, making it less vulnerable than peers to low-end spending pressures.
Growth Drivers Remain Intact
Beyond its strong core U.S. business, Costco’s long-term growth story remains open-ended. The company continues expanding internationally, adding warehouse clubs in high-growth markets such as China and Japan.
Additionally, Costco is well-positioned to capture continued momentum in its non-foods segment through a strong assortment of Apple (AAPL) electronics, branded apparel, and home appliances, all offered at attractive price points.
I also see continued room for upside in Costco’s ancillary businesses, which include travel, optical, and fuel operations—each providing meaningful incremental profitability. Combined with expanding private-label offerings under the Kirkland Signature brand, these drivers should help sustain top-line and margin growth over the coming years.
Premium but Justified Valuation Provides Reassurance
Costco has rarely traded at a discount, and that remains the case today. The stock currently commands a P/E ratio of 50x—well above the sector median of 16x—underscoring its premium standing in the retail landscape.
Yet when viewed through enterprise multiples, the valuation appears more balanced: Costco’s EV/Sales (TTM) sits at 1.45 versus a sector median of 1.47, and its Price/Sales (TTM) stands at 1.47 compared to 1.06 for the sector. This suggests that while investors pay a premium for Costco’s earnings, that premium is supported by the company’s high-quality revenue base and consistent expansion.
If using classic valuation models—including five-year DCF EBITDA Exit, P/E multiples, and Price/Sales comparisons—I arrive at a fair value estimate of approximately $790 per share, implying about 13% downside from current levels.
However, Costco’s long-term record of outpacing the sector—with a five-year revenue CAGR of 10.9% and EBITDA CAGR of 14.7%—supports the view that the market will continue to reward its stability, scale advantages, and growth consistency with a valuation premium. Overall, the recent pullback appears to have recalibrated investor expectations, creating a more attractive entry point for those seeking durable, long-term compounding in a best-in-class retail operator.
Is Costco Stock a Good Buy?
According to Wall Street analysts tracked by TipRanks, COST stock has a broadly positive outlook. The stock carries a Moderate Buy consensus rating based on 25 analysts, including 16 Buys, 9 Holds, and zero Sells. The average stock price target stands at $1,087.53, representing nearly 17% upside over the next 12 months.
Costco Remains a Premium Retailer With a Rare Discount
Costco remains one of the most durable growth stories in retail. The company continues to gain share across all categories, deliver double-digit comp growth, and expand margins—even as other retailers struggle with slowing traffic and shrinking budgets.
While the stock’s valuation is undeniably rich, its resilience, financial strength, and track record of consistent execution justify a premium multiple. The recent 15% pullback provides a rare opportunity to own this best-in-class retailer at a relative discount.
With continued membership growth, expanding margins, and broad-based category strength, I remain Bullish on Costco and view current levels as an attractive entry point for long-term investors.