Costco slides 13% from record as analysts back post-earnings dip

Costco Wholesale Corp. shares slid 13% from a record high to $949.50, their lowest since January, after a mixed quarterly report triggered profit-taking.

"The selloff looks like profit-taking after a mixed quarter, not a break in the core model," David Bellinger, an analyst at Mizuho, said. Costco's investment in keeping prices low is consistent with its strategy of maintaining customer loyalty and membership renewals, he said.

The stock fell for the seventh time in eight sessions after Costco reported earnings per share that missed estimates by $0.06, even as revenue topped forecasts. Comparable-store sales excluding gasoline rose 6.6%, slightly below the 6.7% consensus. Total revenue grew 12%, helped by strong gasoline demand.

The decline puts the stock at its lowest since late January, testing support near $950. Analysts see the pullback as a buying opportunity, with consensus estimates calling for double-digit earnings growth this fiscal year and next.

Jefferies analyst Corey Tarlowe said Costco's pricing advantage continues to drive traffic and market share gains in a price-sensitive environment. "Elevated gas engagement is reinforcing member loyalty and frequency, supporting both near-term comps and long-term ecosystem strength," Tarlowe said.

D.A. Davidson analyst Michael Baker added Costco to his firm's best-of-breed list after the selloff, citing the warehouse club model's structural advantages. Warehouse clubs account for about 5% of total US retail sales but have grown at an average annual rate of 6% since 2007 and 11% since 2018, outpacing both broader retail and grocery markets, Baker said. Costco has grown 9% annually over the same period, taking share from competitors.

The stock still trades at about 42 times forward earnings, a premium that some investors view as demanding. Baker noted that Costco has returned $19.7 billion to shareholders through dividends over the past five years and repurchased an additional $3.2 billion of stock.

The decline tests the stock's 50-day moving average after the post-earnings slump. Investors will watch Costco's July sales report for signs that membership trends and traffic remain resilient.

This article is for informational purposes only and does not constitute investment advice.