Costco Wholesale (NASDAQ:COST) has been a transformative player in the retail space. The company's low-margin business model works well because it's able to lure customers to pay for memberships in order to get access to its warehouse stores. That's a model that's been able to survive even as e-commerce growth has threatened other traditional brick-and-mortar retailers.

Costco is likely to release its fiscal fourth-quarter earnings report on Thursday, Oct. 3, and investors are anxiously looking forward to seeing how the warehouse retail giant has done during the summer months. The stock climbed to record levels over the past month, but some wonder whether the positive momentum that Costco has enjoyed is likely to continue amid rising uncertainty about the future of the economy.

Key stats on Costco

Metric

Current Stat

Expected EPS growth

7.6%

Expected revenue growth

7.2%

Forward earnings multiple

34

Expected 5-year annualized growth rate

10.2%

Data source: Yahoo! Finance.

What's ahead for Costco?

Investors in Costco have generally been more upbeat in recent months about their expectations for the company's earnings. Modest increases to earnings projections for both the current fiscal year and next year have reflected optimism about Costco's business prospects. The stock price has reflected that sentiment, as shares are up about 9% since late June.

Costco's fiscal third-quarter numbers helped drive some enthusiasm about the retailer. During that period, revenue rose 7.4% from year-earlier levels, and net income was up 21% over the same period. Strong comparable sales performance showed the continued popularity of the Costco experience, and even though the strong U.S. dollar held back results overseas, the international business played a key role in helping Costco's overall numbers. E-commerce initiatives continued to pay off, making up for somewhat sluggish gains in membership fee revenue.

Costco logo in red and blue.

Image source: Costco.

Monthly sales figures from the current quarter suggest accelerating performance over the course of the period. Comparable sales in both June and July were up 5.1% even after taking out impacts from gasoline sales and foreign exchange issues. The e-commerce channel was especially lucrative, picking up 20.8% year over year in June and 23.8% in July. Those figures were up from May, which featured a 4.2% rise in comps and 19.9% e-commerce growth. The story kept looking better in August, with overall adjusted comps climbing to 5.9% on another 23.8% growth reading in e-commerce.

Yet some investors have gotten nervous about the extent to which Costco's stock price has already risen. In mid-September, analysts at Oppenheimer cut their rating on the stock from outperform to market perform, arguing that the then-45% year-to-date rise in the share price gave the stock little immediate upside potential. Longer term, Oppenheimer was optimistic about Costco's ability to keep producing strong performance, but it's increasingly difficult for many shareholders to justify a forward earnings multiple above 30 for a company whose future growth prospects are a lot slower than many of the companies fetching those valuations.

Still, Costco has a lot of popularity, especially overseas. In August, the company opened its first location in China, and the result was predictably outlandish. The opening brought so many curious customers into the store's doors that it caused traffic jams. Eventually, the Costco location had to close early on its first day, but the way the day went showed just how much demand there is for the sorts of retailers that can deliver the range and quantity of products that Costco is famous for having.

In its quarterly report, Costco investors will want to see evidence that the warehouse retailer is steering clear of some of the challenges hitting more traditional retailers. As long as its business model remains intact, Costco has plenty of opportunities to grow and keep delivering operational excellence to both customers and shareholders.