Costco Wholesale (COST) saw its shares decline in Thursday morning trading after reporting a deceleration in June comparable sales growth, despite posting its highest monthly sales tally of the year. The stock opened at $930 and fell roughly 4% to $912.76, as investors reacted to the slower pace of expansion.
The warehouse retailer reported net sales of $29.24 billion for the five-week period ending July 5, a 10.6% increase year-over-year. Comparable sales rose 8.8% overall, but excluding the impact of gasoline and foreign exchange, the figure stood at 7.0%. This marked a slowdown from May’s 8.0% gain (ex-gas/forex) and April’s 11.6% rise, according to Barron’s. Digitally enabled sales surged 20.9%, underscoring strength in e-commerce.
Investor concern centered not on Costco’s fundamental health but on the deceleration trend. The stock’s elevated price-to-earnings ratio leaves little room for error, making it sensitive to any signs of slowing momentum. Citi maintained a Neutral rating and $1,020 price target, noting that June’s U.S. comparable sales growth (ex-gas/forex) slowed to 7.6% from 8.7% in May, while the average ticket rose 3.7%.
Despite the slowdown, there were bright spots. Including gasoline, U.S. comparable sales climbed 10.6%, Canada rose 3.7%, and other international markets gained 4.7%. Costco also declared a quarterly dividend of $1.47 per share, payable August 7 to shareholders of record July 24. The company operates 933 warehouses globally.
Market sentiment on Costco remains mixed. Its membership model and low-price strategy provide a defensive buffer during economic uncertainty, attracting bargain-hunting shoppers. However, competitors like Walmart (WMT) and Amazon (AMZN) are intensifying their value propositions and delivery capabilities. Reuters recently reported that Costco’s U.S. same-day delivery averages under 45 minutes, indicating the company is keeping pace on speed.
Management is focused on pricing. On the fiscal Q3 earnings call, CFO Gary Millerchip emphasized that Costco has “really invest[ed] in increasing value to the member,” citing examples such as eggs and meat. He noted that the Kirkland Signature brand offers savings of “at least 15% to 20%” versus national brands with comparable or superior quality. Additionally, Millerchip said Costco has “widened our gaps in terms of price” on gasoline, a key driver of member traffic.
Analyst reactions were largely positive but tempered with caution. William Blair’s Phillip Blee maintained a Buy rating, citing traffic gains and Costco’s defensive positioning, though he warned of slower international markets and limited margin for valuation error. Telsey Advisory reiterated a Buy with a $1,135 price target. JPMorgan trimmed its target to $1,100 from $1,110 while keeping an Overweight rating. Overall, 22 analysts rate Costco a Buy, 11 Hold, and one Sell, according to MarketBeat.
Risks remain. If gas-fueled traffic declines, tariffs raise costs, currency fluctuations pressure overseas sales, or Costco continues cutting prices to retain customers, profit margins could compress. The company’s own risk factors include tariffs, global conflicts, inflation, currency rates, and consumer spending shifts.
June’s results provide ammunition for both bulls and bears. Sales growth persists at a rate most retailers would welcome, but Costco’s stock is priced for perfection, leaving little room for disappointment. The upcoming test will be whether the company can sustain momentum amid competitive and macroeconomic headwinds.
