‘Costco is in a funk’ but it’s still a good name in a bad place
Costco’s monthly sales growth slowed in June — a sign that even one of the store’s most powerful employees isn’t immune to the economic realities that have shifted consumers. Costco reported late Wednesday that June total sales rose 10.6% year over year to $29.4 billion, coming in slightly below expectations. Discounting June comparisons in the US, excluding gasoline, sales rose 7.6%, down from an 8.7% gain in May, and modestly below Mizuho analysts’ expectations of 8% to 9%. All categories fell slightly last month. Shares of the members-only retailer fell more than 4% on Thursday. While the stock is still up about 5.5% year to date, that performance trails the S&P 500’s roughly 10% gain. “Costco is in a funk,” Jim Cramer said Thursday on CNBC, noting that the company is doing business in a tough economic environment. Still, portfolio manager Jeff Marks pointed out the importance of diversification. “They’re doing well, but was it good in May? No, that’s why the stock is down,” Jeff said during Thursday’s Morning Meeting of Club members. “This is a very defensive name that can put in strong comps even when the economy is good or bad,” he added. For his part, Jim said he would be interested in buying Costco stock if it broke below $900 per share. The stock was trading around $913 in afternoon trading. Simply put, Jim thinks Costco is a good name in the wrong place, pointing to hot profits in the retail sector as a whole. The popular IS&P Retail ETF (XRT) is up just 1.7% year to date. That underperformance was reflected in the latest KeyBanc Capital Markets consumer survey, conducted late last month and published Monday. During the March to June quarter, spending intentions and financial confidence both weakened, KeyBanc found, as consumers remained concerned about higher food costs, their personal income, and higher gas prices. That concern is consistent with recent consumer sentiment surveys and Costco’s June traffic and ticketing trends. Domestic traffic increased 3.2% in June, about 50 basis points slower than the previous month. Excluding fuel, foreign exchange, and inflation, average ticket growth fell to 3.7% from 4% in May. It wasn’t all bad. Costco’s businesses, including gasoline and pharmacy, were strong last month. As well as digital sales, e-commerce increased by 21.5%, slightly faster from 20.9% in May, which may have benefited from Costco’s online Membership Appreciation Days held from June 22 to June 26. COST YTD mountain Costco YTD leaves little room for disappointment. Costco stock trades at 41 times past earnings, according to FactSet. That’s more than Walmart’s multiple of 36.5 times and doubles the S&P 500’s price-to-earnings ratio of about 20.5. “Very few retailers can post a disappointing profit of +7.6% in any month – including healthy traffic levels worldwide – yet the high number at which COST trading sets the bar high,” Mizuho wrote in a research note after the release. Analysts described the monthly report as “good” but “not that strong.” Wells Fargo struck a similar tone, saying Costco’s results fell short of expectations without changing the retailer’s competitive position. Another important metric investors will continue to watch is membership growth, which has also been slowing. Membership numbers are released quarterly. In its Q3 fiscal 2026 financial report, released in late May, Costco delivered enough. Paid members reached 82.9 million but grew by 4.1% year-on-year. The global member renewal rate managed to remain strong at 89.7%. Costco will release July sales on Aug. 5. The company’s earnings report for the last quarter of its fiscal year 2026 will be released on Sept. 24. (Jim Cramer’s Charitable Trust is long COST. See here for a full list of stocks.) As a CNBC Investing Club subscriber with Jim Cramer trade, you will receive the art of trading Jim Cramer. Jim waits 45 minutes after sending a trade alert before buying or selling stock in his charity portfolio. When Jim talks about a stock on CNBC TV, he waits 72 hours after issuing a trade warning before making a trade. THE PRIVATE INFORMATION OF THE BURNING CLUB IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, AND OUR PRIVACY POLICY. NO LEGAL LIABILITY OR OBLIGATION EXISTS, OR IS CREATED, BY YOUR ACCEPTANCE OF ANY INFORMATION PROVIDED BY CONTACTING THE INVESTMENT CLUB. NO PARTICULAR RESULT OR INTEREST IS GUARANTEED.
