Costco Wholesale (NASDAQ:COST) shares have easily outperformed the broad market in recent weeks. The last leg of that rally was prompted by its September adjusted same-store sales growth of 16.9%, accelerating from 14.1% last quarter. Analysts with Jefferies even upgraded the stock to a buy earlier this month, when the shares traded 33% above their late-March low, citing the company's widening "leadership moat."  

Simply put, investors couldn't ask for much more.

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There's a stumbling block that could trip up Costco stock's recent advance, however, particularly without a coronavirus vaccine ready to go. Several competitors have recently added new curbside pickup and delivery options, giving Costco's more cautious in-store customers a way to avoid the risk of infection. This is not a gaping liability. However, with Costco shares trading at a relatively rich valuation of around 40 times earnings (past and projected), these rivals' efforts could take just enough of a toll on the warehouse club's top line to reverse the recent rally.

No curbside pickup offered

Costco already had alternatives to in-store shopping before the pandemic took hold. Grocery delivery was an option, for instance, thanks to help from Instacart and Shipt.

The retailer has continued to adapt, though. During the earliest days of the pandemic, it acquired delivery service Innovel, bolstering its ability to deliver bulky goods. By April, it had tapped Instacart to handle domestic prescription deliveries. In July, Costco announced a new partnership with Instacart to offer same-day grocery deliveries in Canada. In-store pickup of online orders is also an option, even if only for a small set of nongrocery, discretionary goods -- and customers must physically enter the store to retrieve those items.

But curbside pickup of anything available inside any particular store? Forget about it. CFO Richard Galanti commented during last month's earnings call, "We have people here that study [curbside pickup] and maybe we'll surprise you one day, but at this juncture, we're not prepared to do that."

His rationale is reasonable enough...in-store shoppers tend to spend more per trip. There's also the cost involved. Costco earned a very modest 2.4% net margin in fiscal 2020: around its historical norm. Staffing a curbside pickup site would eat into those already-thin margins. Besides, Costco parking lots are generally packed with cars wrapped all the way around the building. There may not be space to add the nicety. Given the company's strong same-store sales growth recently, some investors may think it doesn't matter anyway.

Much has changed in just the past month, however. A bunch of new curbside pickup points have become available to Costco customers who may be mulling such a change. A major grocery rival also just launched an expansive delivery service. And there's more on the way.

Here come the alternatives

Walmart (NYSE:WMT) is one of those rivals, launching Walmart+ just last month. The highlight of Walmart+ is unlimited free grocery deliveries, currently available as soon as same day from 2,700 of Walmart's 4,753 U.S. stores, with more stores being added on a regular basis. Consumers are showing strong interest too. A recent Piplsay report found that 11% of the country's consumers had signed up for Walmart+ within the first two weeks of its mid-September availability, 

Walmart isn't the only retailer upping its grocery game, either. Last week, Amazon (NASDAQ:AMZN) announced it was now offering curbside pickup for Prime members' online grocery orders at its 500-plus Whole Foods Market grocery stores, complementing its free two-hour delivery service for other online orders made by Prime members.

Even off-the-radar Albertsons (NYSE:ACI) -- which only offered curbside pickup at about 600 of its 2,252 stores as of the beginning of this year -- has turned heads. With 950 curbside pickup points now in place, the grocer touted year-over-year digital sales growth of 243% for the three-month stretch ending in September. The company is on pace to have curbside pickup up and running at about 1,400 stores by the end of fiscal 2020.

Costco's model is admittedly a bit different than those of Walmart, Albertsons, and Amazon. The warehouse retailer caters to a low-frills, bargain-minded shopper, driving more sales per square foot of selling space. These rivals won't necessarily earn their growth at the expense of Costco.

The palpable threat is the sheer scope of this competition, though. Costco operates fewer than 800 stores, most of which are in North America. Albertsons, Walmart, and Whole Foods alone collectively operate more than 7,000 stores just in the U.S., with curbside pickup and/or delivery being offered from more of them seemingly every day. Modest success for these rivals on these two fronts could take a noticeable bite out of Costco's growth.

Bottom line

There's no need to fear the worst. Plenty of Costco loyalists aren't thinking twice about COVID-19, and many who are worried seem to have found a new way to shop. Last quarter, Costco's e-commerce revenue surged more than 90%, even though that option is limited to Costco members as well.

With shares priced around 40 times its past and projected earnings and competitors turning up the heat on curbside and delivery, Costco stock offers more risk than reward right now. The number of new COVID cases in the U.S. is breaking records, which only makes these alternative shopping options more compelling. Investors may want to stay on the sidelines here and see how things shake out.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.