You'd probably struggle to find investors that wouldn't agree that Costco (COST +1.10%) is a wonderful business. The performance of the shares speaks for itself over the long term. However, this year hasn't been as kind. The top retail stock's price is down 6% in 2025 (as of Dec. 17), despite the company performing well.
With shares 20% off their peak, investors that haven't owned the business might be ready to buy the dip. Before doing so, here's what to watch in 2026.
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1. Costco's same-store sales are impressive
One of the most important metrics for any retailer is same-store sales (SSS), as it shows changes in productivity at existing locations. Ideally, investors want to see this metric growing consistently. Costco excels in this regard, which demonstrates the incredible value proposition it provides to customers, regardless of economic conditions.
In fiscal 2020, a year when the COVID-19 pandemic disrupted in-person shopping, Costco was still able to report positive SSS of 7.7%. In fiscal 2021 and fiscal 2022, years characterized by above-average inflation, SSS rose 16% and 14.4%, respectively. The positive trend has kept up today.
There's no reason to doubt Costco's ability to increase its SSS throughout 2026. Through a combination of more foot traffic and higher average ticket sizes, Costco is proving that it's the gold standard in the retail sector. Investors must pay close attention to SSS to gauge the health of the business.
2. Make sure growth remains a focal point
Costco currently has 921 warehouses, with about two-thirds of them in the U.S., its most important geography. Despite its size, with massive Q1 2026 (ended Nov. 23) net sales of $66 billion, the management team continues to press the gas pedal on growth. Costco plans to open 28 net new warehouses in fiscal 2026.
The company still has a meaningful opportunity to expand in the U.S. And there is potential in international markets as well, especially China. That's an encouraging view for investors. It supports higher revenue in 2026 and beyond.
NASDAQ: COST
Key Data Points
3. Investors shouldn't ignore the valuation
Costco's performance in 2025 wasn't a cause for concern. As mentioned, the business continued to do well. Its net sales and net income increased 8% and 10%, respectively, year over year in fiscal 2025 (ended Aug. 31), gains that continued in the latest fiscal quarter.
But maybe the stock has done poorly this year because the market had valuation concerns. It still looks expensive, though, at a price-to-earnings ratio of 46, but it's a better setup than the multiple of 63 earlier in 2025. Investors need to avoid overpaying, no matter how great a company is. However, I believe there's a good chance the market starts appreciating Costco more in 2026.
