Costco (COST) Stock: Drops as Earnings Leave Investors Cautious. Here's Why

TLDR

Table of Contents

Costco beat earnings expectations with $5.87 per share vs $5.80 forecast and revenue of $86.2 billion
Same-store sales grew 5.7%, missing the 5.9% forecast and below last year’s 6.9% growth
Membership income jumped 14% and e-commerce same-store sales rose 13.6%
Stock trades at 47 times forward earnings, creating high investor expectations
Bank of America maintains Buy rating with $1,095 price target despite mixed results

Costco delivered another quarter of growth, but investors aren’t popping champagne just yet. The warehouse retailer beat Wall Street’s earnings estimates but stumbled on a key metric that has traders hitting the brakes.

Costco Wholesale, $COST, Q4-25. Results:
📊 Adj. EPS: $5.87 🟢
💰 Revenue: $86.16B 🟢
📈 Net Income: $2.61B
🔎 Strong top-line growth with $84.4B in net sales, boosted by double-digit e-commerce performance. pic.twitter.com/M7g5j61EeH
— EarningsTime (@Earnings_Time) September 25, 2025

The company reported adjusted earnings of $5.87 per share for the quarter ending August 31. That topped analysts’ consensus estimate of $5.80 per share, giving shareholders something to smile about.

Revenue came in at $86.2 billion, slightly ahead of the $86 billion projection. The numbers show Costco continues to pull in customers and drive sales across its warehouses.

But here’s where things get interesting. Same-store sales increased 5.7% from last year, falling short of the 5.9% forecast that analysts were expecting.

That 5.7% growth also represents a slowdown from the 6.9% increase Costco posted in the same quarter last year. This marks the second straight quarter where same-store sales have missed expectations.

Valuation Concerns Weigh on Investor Sentiment

The stock currently trades at 47 times next year’s projected earnings. While that’s down from earlier peaks this year, it’s still well above historical averages for both Costco and the retail sector.

This high valuation means investors won’t cut the company much slack when quarterly results come in mixed. The market has been willing to pay premium prices for Costco’s steady performance, but that patience has limits.

Costco shares dropped 0.9% in premarket trading Friday to $935.04. The stock is up just 3% this year through Thursday’s close, lagging the S&P 500’s 12% gain and the retail sector’s 8% increase.

Despite the same-store sales miss, several bright spots emerged from the quarterly report. Membership income grew 14% from the previous year, with about half that increase coming from last year’s membership fee hike.

E-commerce delivered strong results with online same-store sales climbing 13.6% year-over-year. Gold, jewelry, housewares, and apparel led the online growth with double-digit percentage increases.

Strategic Moves Pay Off

Costco’s decision to extend shopping hours for Executive members has started paying dividends. Since late June, Executive members who pay double the standard annual fee can shop an hour before regular opening time.

This policy change has boosted weekly U.S. sales by about 1% since implementation, according to CEO Ron Vachris. The early shopping hour helps reduce congestion during peak times while encouraging membership upgrades.

The company opened 27 new warehouses during the fiscal year that ended in August. Plans call for another 35 store openings in fiscal 2026 as Costco continues expanding its global footprint.

Supply chain improvements and increased penetration of the company’s Kirkland Signature private label brand helped boost gross margins during the quarter. These operational gains show management’s focus on efficiency is working.

Wall Street analyst Robert Ohmes from Bank of America Securities maintained his Buy rating on Costco stock. He set a $1,095 price target, citing the company’s strong financial performance and strategic initiatives.

Ohmes highlighted Costco’s ability to maintain stable pricing while focusing on high-ticket items for the holiday season. He expects membership fee increases and extended store hours to continue driving sales growth.

Despite a slight decline in renewal rates, both overall membership and Executive membership penetration continue growing. This supports Costco’s competitive position and expected market share gains going forward.

The company’s EBITDA margin remains stable and rising, providing a solid foundation for future growth. Costco’s value-focused positioning continues attracting consumers during economic uncertainty.

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