Costco Wholesale (COST +1.33%) continued its streak of strong results when it reported its fiscal Q1 earnings, but its stock, nonetheless, remains stuck in the mud. It's now trading down nearly 5% year to date and is about 11% lower over the past year, as of this writing.
Below, I'll take a closer look at the retailer's results and prospects to see if the stock can break out in 2026.
Strong momentum
Costco's momentum continued in fiscal Q1, led by strong e-commerce sales. Digital revenue surged 20.5%, with traffic climbing 24% and average order value up 13%. App traffic, meanwhile, soared 48%.
Image source: Getty Images.
The company credited the gains to the introduction of personalized product recommendations, improved display pages, and better search functionality. Meanwhile, it said after the quarter that it saw a record Black Friday for its e-commerce business, with $250 million in non-food orders.
Overall, the company's fiscal Q1 revenue jumped 8% to $67.31 billion and adjusted earnings per share (EPS) rose 11% to $4.50. That was ahead of the analyst consensus for EPS of $4.27 on revenue of $67.14 billion, as compiled by LSEG.
Same-store sales climbed by 6.4% when adjusting for changes in gasoline prices and foreign currency. U.S. same-store sales rose 5.9% (adjusted), while Canadian comparable-store sales climbed 9% (adjusted). Other international same-store sales rose by 6.8% (adjusted).
Excluding gasoline and currency impacts, Costco's average transaction rose 3.2% both worldwide and in the U.S., and traffic grew by 3.1% worldwide and 2.6% in the U.S. Meat sales continue to be strong, with another quarter of double-digit comparable-store sales growth, while overall fresh-food sales were up in the mid- to high-single digits. Non-food same-store sales rose in the mid-single digits, led by double-digit gains in gold and jewelry and health and beauty.
Membership-fee revenue jumped 14% year over year in the quarter to $1.33 billion, helped by a price hike in September 2024. Paid memberships, meanwhile, rose by 5.2% to 81.4 million paid households. Higher-cost executive memberships jumped by 9.1% to 39.7 million. These customers account for 49% of total paid memberships but make up 74.3% of Costco's worldwide sales.
Costco's membership renewal rate was 92.2% in North America and 89.7% worldwide and was once again impacted by lower renewal rates from younger consumers who sign up through digital channels. The company continues to work on ways to keep these customers engaged through targeted communication to help stabilize renewal rates in the coming quarters.
The warehouse club opened eight new locations in the quarter, including one relocation, for a total of 921 stores. It reduced its new store outlook to 28 stores this fiscal year due to delays in Spain, but continues to plan to open 30 or more in future years.
NASDAQ: COST
Key Data Points
Is Costco stock a buy?
Costco continues to see some of the strongest same-store sales among brick-and-mortar general merchandise retailers. Its comparable-store sales are growing more quickly than competitors like Walmart, which saw 4.5% U.S. comps and 3.8% at Sam's Club, and Target, where same-store sales dropped 2.7%. Meanwhile, this past year, the company got a nice lift from a membership price increase, which is 100% gross margin and falls right to the bottom line. However, that benefit is now in the past.
Despite this, the stock has gone nowhere over the past year. This is largely due to valuation, as the stock's forward price-to-earnings ratio (P/E) is a hefty 43.5 times. That's actually below the more than 55 times it traded at earlier this year. However, it has historically traded at a trailing P/E between 30 and 40 times.
Data by YCharts.
Given its valuation, Costco's stock probably will be pretty range-bound over the next year, before it can start returning to its winning ways. The retailer is hitting on all cylinders but still needs to catch up to its valuation.
