Costco Wholesale Corporation (COST Quick QuoteCOST - Free Report) recently released its January sales results, offering fresh insights into the retailer’s performance. As one of the most resilient warehouse chains, Costco remains a favorite among long-term investors. However, the latest numbers could play a key role in deciding the stock’s trajectory. Let’s break down the results to determine whether Costco is a buy, hold or sell after this sales report.

A Sneak Peek Into Costco’s January Sales Figures

Costco's membership-driven model remains a key factor in its growth, with high renewal rates providing a reliable revenue stream. Its efficient supply chain and bulk purchasing power support competitive pricing, strengthening its market position. The combination of strong customer loyalty and operational efficiency helps Costco maintain an edge in the competitive retail landscape.

For the four weeks ended Feb. 2, 2025, comparable sales in the United States grew 9.2%, while Canada and Other International markets saw increases of 5.7% and 1.1%, respectively. The total company comparable sales rose 7.5%. This follows consecutive increases of 7.4% and 3.1% in December and November, respectively. (Read: Costco’s Stellar Comparable Sales Growth Continues in January)

As a result, Costco's net sales for January increased 9.2%, reaching $19.51 billion, up from $17.87 billion in the same period last year. This follows a sales improvement of 9.9% and 5.6% reported in December and November, respectively, reflecting a strong and consistent sales performance in the past few months.

Costco Fundamentally a Strong Investment Choice

Costco continues to impress with its stellar revenue performance, showcasing its ability to navigate through shifting economic dynamics. The consistent growth in membership fee income and high renewal rates surpassing 90% in key markets like the United States and Canada highlight Costco's effective customer retention strategies. 

With a substantial base of paid household members and increasing executive memberships, Costco ensures a steady flow of high-margin recurring revenues. Paid household memberships rose 7.6%, while Executive Memberships, which contribute 73.1% of worldwide sales, increased 9.2% during the first quarter of fiscal 2025.

Costco has demonstrated strong comparable sales growth, driven by solid performances in both physical and digital platforms. With plans for significant new openings domestically and internationally, Costco is poised to capture new markets and strengthen its competitive position in the retail landscape.

Costco’s disciplined approach to cost control, product mix optimization and increasing penetration of its private-label brand, Kirkland Signature, have contributed to margin improvement. The company's ability to leverage economies of scale and growing digital commerce initiatives further enhance profitability. These operational efficiencies, alongside a strong balance sheet, provide a solid foundation for growth.

Valuation Analysis: Is Costco’s Premium Price Justified?

Costco stock has been a standout performer, with shares rallying 47% over the past year, outpacing the industry's rise of 24.2%. This impressive growth underscores investor confidence in Costco’s business model.
 

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However, Costco is trading at a significant premium to its industry peers, such as Dollar General Corporation (DG Quick QuoteDG - Free Report) , Target Corporation (TGT Quick QuoteTGT - Free Report) and Ross Stores (ROST Quick QuoteROST - Free Report) . Costco's forward 12-month price-to-earnings ratio stands at 56.57, higher than the industry’s ratio of 33.40 and the S&P 500's ratio of 22.54.
 

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Now, the question that arises is whether Costco’s current price is warranted or overvalued in today’s market.

Costco’s premium valuation reflects investor confidence in the company’s ability to deliver consistent growth and maintain its competitive advantage. While the stock’s current price may seem high, its robust business model, strong customer base and reliable revenue streams justify the premium.

Here’s How Estimates Stack Up for COST

Reflecting the positive sentiment around Costco, the Zacks Consensus Estimate for earnings per share has seen upward revisions. Over the past seven days, analysts have increased their estimates for the current and the next fiscal year by 2 and 3 cents to $18.03 and $19.69 per share, respectively. These estimates indicate expected year-over-year growth rates of 11.9% and 9.2%, respectively.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
 

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Should You Invest in Costco Now or Wait for a Pullback?

Costco’s robust business model, characterized by its loyal membership base, operational excellence and adaptability to market trends, continues to position the company as a strong player in the retail sector. Despite its premium valuation, Costco’s consistent sales growth, profitable membership fees and expanding global presence provide a compelling investment case. Holding a Zacks Rank #2 (Buy) at present, Costco’s stock offers promising upside potential, making it an attractive option for investors looking for stability and growth in the retail space. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.