The company is capturing increasing market share from cost-conscious shoppers.There are a few reasons why folks are discussing Costco (COST 0.59%) stock, which I detail in this video.*Stock prices used were the afternoon prices of Dec. 16, 2025. The video was published on Dec. 18, 2025. ...

Core Business Performance - Costco's core business is thriving, allowing it to sell products at low margins due to significant profits from membership fees [3] - The company maintains a narrower product selection compared to superstores, which helps control inventory and costs [4] - Key performance metrics such as comparable store sales, new warehouse openings, cardholder growth, and renewal rates have all increased from fiscal 2020 to fiscal 2025 [5][6] Membership and Pricing Strategy - Costco raised its membership fees for the first time in seven years in September, yet continued to attract new cardholders and maintain high renewal rates [7] - The pricing power from membership fees helps mitigate inflationary pressures on product sales [7] Stock Performance and Valuation - Costco's stock has underperformed the market, declining over 10% in the past 12 months while the S&P 500 rose 16% [1] - High valuations and low yield are limiting the stock's upside potential, although it remains a solid long-term investment [8] - In the first quarter of fiscal 2026, adjusted comparable sales rose 6.4%, with an increase in warehouse count to 923 locations and a total of 145.9 million cardholders [9]

Core Viewpoint - Costco's stock performance is under scrutiny despite strong earnings, as it is perceived to be overpriced given its current growth rate and high valuation [4][6][8] Financial Performance - Costco reported net sales growth of over 8%, reaching just under $66 billion for Q1 of fiscal 2026, which ended on November 23, 2025 [5] - The company's stock is currently trading at a price-to-earnings multiple of 46, indicating a high premium for a retailer with single-digit growth [6] Market Sentiment - Despite beating earnings expectations, Costco's stock has declined by 6% this year, reflecting investor concerns about its high valuation and economic conditions [2][4] - The lack of guidance from the company regarding future demand has left investors uncertain about its performance in upcoming quarters [7] Investment Considerations - Costco may still be a solid long-term investment due to its strong fundamentals, but short-term declines could be expected without significant growth opportunities [8][9] - The current valuation does not provide a margin of safety for investors, especially if economic conditions worsen [8]

Costco is one of those stores where it's hard to imagine what it feels like to shop there unless you've done it yourself. Even though I've been a Costco member for roughly 20 years, there are times when I still marvel at the store's massive size, impressive inventory, and ever-changing layout. In fact, during the Covid pandemic, when there were strict rules about how many customers Costco would allow in the store at a time, I took to ordering from Costco online because I couldn't deal with waiting in long ...

Financial Performance - Net sales increased by 8% to $65,978 million, driven by a 6% increase in comparable sales and sales from 25 net new warehouses opened since the end of Q1 2025[75]. - Membership fee revenue rose by 14% to $1,329 million, primarily due to membership fee increases and new member sign-ups, with total paid members reaching 81,400,000[79][80]. - Gross margin increased to $7,468 million, with a gross margin percentage of 11.32%, up from 11.28% in the previous year[82]. - Comparable sales growth was 6% for the total company, with increases of 6% in the U.S., 7% in Canada, and 9% in Other International markets[76]. - Digitally-enabled comparable sales surged by 21%, reflecting strong performance in e-commerce initiatives[77]. - The volume of gasoline sold increased by approximately 4%, contributing positively to net sales by $234 million[77]. Membership and Renewal - The renewal rate for memberships was 92.2% in the U.S. and Canada, and 89.7% worldwide, impacted by a higher number of memberships sold online[80]. Operational Costs - SG&A expenses as a percentage of net sales increased by one basis point, indicating a slight rise in operational costs relative to sales[75]. - SG&A expenses totaled $6,334 million, with SG&A as a percentage of net sales at 9.60%[86]. Gross Margin Analysis - Gross margin as a percentage of net sales increased by four basis points, with a similar increase when excluding gasoline price deflation[83]. - Gross margin in core merchandise categories increased by 30 basis points across all categories[84]. Tax and Interest - The effective tax rate for the quarter was 22.5%, slightly up from 22.0% in the prior year[75]. - The effective tax rate for the first quarter was 22.5%, influenced by discrete tax benefits related to stock compensation[91]. - Interest income increased to $122 million, up from $96 million, due to higher cash balances[90]. Cash Flow and Capital Expenditures - Net cash provided by operating activities was $4,688 million, compared to $3,260 million in the prior year[92]. - Capital expenditures in the first quarter totaled $1,526 million, with a planned total of approximately $6,500 million for fiscal 2026[98]. Shareholder Returns - A quarterly cash dividend of $1.30 per share was declared and paid on November 14, 2025[100]. - The share repurchase program authorized $4,000 million, with $210 million spent on repurchases in the first quarter[101]. Warehouse Expansion - The company opened eight new warehouses, including one relocation, resulting in a net increase of seven warehouses[75]. - The company opened eight new warehouses in the first quarter and plans to open 25 additional warehouses in fiscal 2026[98].

Group 1 - Costco Wholesale Corporation (NASDAQ:COST) has experienced management changes, specifically the departure of CFO Richard Galanti, which has raised concerns among investors [1][2] - The company has seen a slowdown in monthly signups and renewals, which is atypical compared to historical performance [1] - Despite these concerns, there remains a strong affinity for the company and its offerings, indicating potential resilience in the face of management changes [1] Group 2 - Costco operates membership warehouses providing a wide range of products and services, including groceries, fresh food, household goods, and e-commerce options [2] - There is a belief that while Costco has investment potential, certain AI stocks may offer greater upside and lower downside risk [2]

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Core Insights - Deep-pocketed investors are showing a bullish sentiment towards Costco Wholesale, indicating potential significant market movements ahead [1] - Recent options activity reveals a mixed sentiment among investors, with 46% bullish and 36% bearish, highlighting a notable interest in Costco's options [2] Options Activity - A total of 47 extraordinary options activities for Costco have been tracked, with 9 puts totaling $482,760 and 38 calls amounting to $2,532,218, indicating a strong focus on options trading [2] - The price range targeted by large investors for Costco over the last three months is between $760.0 and $1080.0, suggesting expectations for price movements within this range [3] Volume and Open Interest Analysis - Analyzing the volume and open interest of options can provide insights into liquidity and investor interest, particularly for strike prices between $760.0 and $1080.0 over the past 30 days [4] Company Overview - Costco Wholesale operates a global chain of membership-based warehouse clubs, with approximately 910 warehouses serving over 80 million members, generating significant revenue from grocery offerings and general merchandise [9] - The company has a strong member renewal rate of 93% in the US and Canada, and nearly 90% internationally, reflecting customer loyalty [9] Analyst Ratings - Analysts have set an average price target of $1008.0 for Costco, with varying ratings: Neutral from DA Davidson, Sell from Roth Capital with a target of $769, Outperform from Telsey Advisory Group with a target of $1100, and Buy from Goldman Sachs with a target of $1171 [10][11] Current Market Position - As of the latest data, Costco's trading volume stands at 730,883, with the stock price at $865.39, reflecting a 0.58% increase [13]

Economic Overview - The U.S. economy is in a transition phase with easing financial conditions and improving consumer sentiment, supported by a recent rate cut from the Federal Reserve aimed at fostering economic growth as inflation moderates [1] - Households remain budget-conscious, creating a favorable environment for discount retailers as consumers seek affordable options [2] Discount Retail Sector Insights - Discount retailers are experiencing a "trade-down" effect, with consumers across various income levels increasingly opting for value-oriented choices, leading to steady foot traffic [2] - Structural advantages such as lean store formats, efficient supply chains, and digitization enhance the responsiveness of discount retailers to consumer demand [3] - Investments in data analytics and AI are optimizing operations and personalizing customer experiences, contributing to margin stability and competitive pricing [3] Future Outlook for Discount Retailers - The outlook for discount retailers is promising as easing monetary policy is expected to positively influence consumer spending and corporate profits by 2026 [4] - Key players identified for potential investment include Ross Stores, Dollar General, Costco, and Burlington Stores, all of which are well-positioned to benefit from cautious consumer spending [4][7] Company-Specific Highlights Ross Stores - Ross Stores is leveraging its off-price model, with strong branded assortments and effective merchandising driving customer engagement and traffic [5] - The Zacks Consensus Estimate indicates a 6% growth in sales and 1.7% growth in EPS for the current financial year, with further growth expected in the next fiscal year [6] Dollar General - Dollar General's value-and-convenience proposition is expanding its appeal, supported by strategic initiatives that enhance profitability and cash generation [10] - The Zacks Consensus Estimate suggests a 4.7% growth in sales and 6.6% growth in EPS for the current financial year, with continued growth anticipated [11] Costco - Costco's membership-driven model is enhancing traffic and brand loyalty, supported by investments in digital capabilities and operational technology [14] - The Zacks Consensus Estimate forecasts a 7.5% growth in sales and 11.3% growth in EPS for the current financial year, with similar growth expected in the next fiscal year [15] Burlington Stores - Burlington Stores is making progress in its off-price transformation, with strong demand and a robust pipeline of new store openings [18] - The Zacks Consensus Estimate indicates an 8% growth in sales and 18.4% growth in EPS for the current financial year, with further growth projected [19]

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