Costco quarter failed to impress. But there was still a lot to like
Costco beat on quarterly earnings and revenue, though some dings muted investor enthusiasm Friday. Overall, we considered Costco’s fiscal fourth quarter , ending Aug. 31, solid. But as Jeff Marks, director of portfolio analysis for the Club, wrote Thursday evening, the results were not perfect. Same-store sales, referred to as comparable sales or comps in the retail industry, grew 5.7%. They missed estimates for a 5.9% gain and were decelerated from last year’s 6.9% advance. This marks the second consecutive quarter of comps underperformance. That, along with a slight decline in renewal rates and a gross margin miss, sent Costco shares more than 2% lower Friday. The stock’s year-to-date gain of 1% trails the S & P 500 and the retail sector in 2025. COST YTD mountain Costco YTD Jim Cramer had warned Thursday that a post-earnings stock decline was possible if results were less than stellar because it has a high price-to-earnings multiple. Jim wrote Friday that all things considered the value of Costco and its role as an inflation-fighter are too great to ignore. That’s why he recommends that investors own it. We reiterated our buy-equivalent 1-rating and our Club price target of $1,100. We were not the only ones weighing the many high points of Costco’s quarter against areas that need work. There were a slew of price target changes on Wall Street, mostly to the downside. However, in most of the notes, there was also plenty of optimism. Bernstein raised its price target on Costco to $1,140 per share from $1,137 and maintained its outperform buy rating on the stock. The analysts pointed out that deceleration in U.S. traffic growth lapped tough comps from last year’s gift cards and sales of gold and silver bars, and they started to improve late in the quarter as the company extended hours. Bernstein also highlighted Costco’s membership fee growth of 14%, up from 10.4% just last quarter, as Jeff pointed out as well in the Club’s analysis. JPMorgan lowered its Costco price target to $1,050 from $1,160 while maintaining its outperform rating. The analysts took a mixed view on the company’s quarter, pointing to the dip in membership renewal rates, which are expected to continue over the next few quarters. However, like we also said Thursday evening, they are not too concerned because Costco showed a gain in online signups, which tend to skew toward a younger demographic and usher in a new wave of lifelong members. Morgan Stanley lowered its Costco price target to $1,130 from $1,225 and kept its overweight buy rating. The analysts said the company proved again that it’s a “consistent execution machine” in membership fee income and core profitability during fiscal Q4. They noted that while renewal rates ticked down marginally, membership growth and tier upgrade momentum remain intact. Evercore ISI lowered its price target on Costco to $1,025 from $1,060 and kept its outperform rating. The analysts said Costco showcased “impressive traffic and core EPS growth amidst a challenging retail landscape.” Even as input costs increase, the company is expected to leverage its scale and supply chain strengths to effectively navigate tariffs, they wrote, adding that Costco remains a “core holding for its defensive growth and market share gains.” Truist lowered its Costco price target to $1,033 from $1,042 and kept a hold rating. While delivering a strong quarter, the analysts pointed out misses on earnings before interest and taxes (EBIT) and margins. Truist added that Costco’s business remains strong and its extreme value proposition will lead to continued share gains. However, as Jim has said, the analysts said that the stock trading at more than 50 times forward earnings presents a challenge to “put fresh money to work.” (Jim Cramer’s Charitable Trust is long COST. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
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