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Is Costco Stock a Buy, Hold or Sell After Its Q3 Earnings Beat?
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Key Takeaways
Costco topped earnings and revenue estimates as traffic, ticket size and comps strengthened in Q3.
Digitally enabled comp sales jumped 21.5%, and site/app traffic surged 37% on stronger online engagement.
COST ended Q3 with 82.9M paid memberships; Executive members rose 9.6% and drove 75% of sales.
Costco Wholesale Corporation (COST - Free Report) reported its third-quarter fiscal 2026 results on May 28, once again demonstrating the resilience of its membership-driven business model. The warehouse retailer delivered better-than-expected earnings and revenues, supported by strong comparable sales growth, accelerating digital demand and continued membership expansion.
As one of the most defensive names in the retail sector, Costco has historically navigated economic uncertainty better than many peers. With the company continuing to gain market share and deepen member engagement, investors are now evaluating whether the latest results strengthen the case for buying the stock, justify holding existing positions or warrant caution, given its premium valuation.
Costco Delivers Another Quarter of Strong Growth
Costco's third-quarter results exceeded the Zacks Consensus Estimate on both the top and bottom lines while improving from the prior-year period. Growth was driven by healthy traffic trends, higher average ticket, strong digitally enabled demand, membership growth and robust performance across key merchandise categories. (Read: Costco Q3 Earnings Beat on Strong Membership and Digital Growth)
The company's ability to generate strong comparable sales across regions highlights its effective pricing strategy and member loyalty. The metric rose 9.8%, propelled by a 2.2% lift from fuel price inflation and a 1% tailwind from foreign exchange fluctuations. Excluding these factors, adjusted comparable sales climbed 6.6%, reflecting healthy underlying demand. Regionally, adjusted comparable sales increased 6.8% in the United States, 6.2% in Canada and 5.9% in Other International markets.
Costco ended the quarter with 82.9 million paid memberships, up 4.1% from the prior-year period, while total cardholders increased 4% to 148.5 million. Executive memberships rose 9.6% year over year to 41.2 million, reflecting continued member engagement and upgrades.
Management highlighted record gasoline volumes during the quarter, as higher fuel prices made its value proposition more visible to members. Management noted that members who use Costco's gas stations generally visit more frequently, spend more and renew at higher rates, making gas an important loyalty driver.
How Consensus Estimates Stack Up for Costco Post Q3 Earnings
Over the past seven days, the Zacks Consensus Estimate for the current fiscal year has moved up by 5 cents to $20.38, while the estimate for the next fiscal year has also been raised by 5 cents to $22.45. These estimates indicate expected year-over-year growth rates of 13.3% and 10.2%, respectively.
Image Source: Zacks Investment Research
Costco’s Winning Formula: Membership and Digital Expansion
Costco remains one of the compelling long-term investments in the retail space, given its industry-leading value, loyal membership base and consistent execution across both physical and digital channels. The company’s focus on offering high-quality merchandise at compelling prices continues to resonate with consumers who are selective about where and how they spend. This value-driven positioning has allowed Costco to remain relevant across different economic cycles while strengthening its relationship with members. The membership-based model creates a recurring and highly predictable revenue stream.
Membership fee income increased 10.7% year over year to $1,373 million in the last reported quarter. Renewal rates remained strong at 92.2% in the United States and Canada and 89.7% worldwide. Costco is also seeing continued growth in its higher-tier Executive Membership program, which is particularly important because these members tend to shop more frequently, spend more per visit and engage with a broader range of offerings. Executive members now account for approximately 75% of total sales.
The digital ecosystem is also becoming an increasingly important growth engine. Management highlighted strong engagement across its website, mobile app, same-day delivery platform and personalized digital offerings. The company is also leveraging artificial intelligence, enhanced search capabilities and personalization tools to enhance product search and increase conversion rates. Costco is also improving checkout speed through mobile wallet enhancements, digital membership cards and the international rollout of shopping cart pre-scan. These investments should support member traffic and productivity over time. Digitally enabled comparable sales increased 21.5%, while site and app traffic surged 37% during the quarter.
Costco’s warehouse business continues to generate healthy traffic and spending trends. The company currently operates more than 930 warehouses globally and expects to end the fiscal year with approximately 940 locations while targeting more than 30 net new warehouse openings annually over time. Management continues to see significant expansion opportunities across Canada, China, Japan, Korea, Spain, France and the United Kingdom. At the same time, Costco is investing approximately $6.5 billion this year to expand warehouse capacity, remodel high-volume locations, increase logistics capabilities, support Kirkland Signature products and enhance digital infrastructure.
Costco Navigates Competitive Landscape as Peers Scale Up
Costco's impressive sales figures are part of a larger retail picture where competition is intensifying. Rivals like Ross Stores, Inc. (ROST - Free Report) , Dollar General Corporation (DG - Free Report) and Target Corporation (TGT - Free Report) are investing in expanding their product assortments, enhancing supply-chain efficiency, and upgrading in-store and digital experiences to capture greater market share. These retailers are also sharpening their value propositions through competitive pricing, private-label expansion and targeted promotional strategies.
Margins remain a critical area to monitor, with potential concerns stemming from any deleverage in the selling, general and administrative rate. Foreign exchange volatility, potential tariffs on key imports and inflationary pressure create uncertainty.
Does Costco Tick the Boxes for Value Investing?
Costco stock has fallen 5.2% over the past three months compared with the industry’s decline of 4.8%. A sneak peek into key retail peers' performance reveals that shares of Dollar General have tumbled 29.9% during the said time frame, while Ross Stores and Target have climbed 4.8% and 2.6%, respectively.
Image Source: Zacks Investment Research
Despite Costco's strong fundamentals, valuation remains a concern. The stock has historically commanded a premium multiple due to its consistency, brand strength and membership economics. However, that premium can limit near-term upside, especially if investor expectations become too high.
Costco's forward 12-month price-to-earnings ratio stands at 43.53, higher than the industry’s ratio of 30.62 and the S&P 500's 22.23. However, it is trading below its 12-month median level of 46.77, indicating some moderation in valuation. Costco is trading at a premium to Target (with a forward 12-month P/E ratio of 14.54), Ross Stores (28.39 and Dollar General (14.22).
Image Source: Zacks Investment Research
How to Play Costco Stock: Buy, Hold or Sell?
Costco's third-quarter results reinforced the company's long-term strengths. Comparable sales were solid, membership trends remained healthy, digital growth was robust, and management commentary pointed to continued consumer engagement. The business remains well-positioned in a value-conscious retail environment. However, the stock's premium valuation makes the near-term risk-reward more balanced. For investors already holding the stock, the latest quarter supports staying invested, particularly with a long-term horizon. New investors, however, may want to wait for a more attractive entry point.
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Is Costco Stock a Buy, Hold or Sell After Its Q3 Earnings Beat?
Key Takeaways
Costco Wholesale Corporation (COST - Free Report) reported its third-quarter fiscal 2026 results on May 28, once again demonstrating the resilience of its membership-driven business model. The warehouse retailer delivered better-than-expected earnings and revenues, supported by strong comparable sales growth, accelerating digital demand and continued membership expansion.
As one of the most defensive names in the retail sector, Costco has historically navigated economic uncertainty better than many peers. With the company continuing to gain market share and deepen member engagement, investors are now evaluating whether the latest results strengthen the case for buying the stock, justify holding existing positions or warrant caution, given its premium valuation.
Costco Delivers Another Quarter of Strong Growth
Costco's third-quarter results exceeded the Zacks Consensus Estimate on both the top and bottom lines while improving from the prior-year period. Growth was driven by healthy traffic trends, higher average ticket, strong digitally enabled demand, membership growth and robust performance across key merchandise categories. (Read: Costco Q3 Earnings Beat on Strong Membership and Digital Growth)
The company's ability to generate strong comparable sales across regions highlights its effective pricing strategy and member loyalty. The metric rose 9.8%, propelled by a 2.2% lift from fuel price inflation and a 1% tailwind from foreign exchange fluctuations. Excluding these factors, adjusted comparable sales climbed 6.6%, reflecting healthy underlying demand. Regionally, adjusted comparable sales increased 6.8% in the United States, 6.2% in Canada and 5.9% in Other International markets.
Costco ended the quarter with 82.9 million paid memberships, up 4.1% from the prior-year period, while total cardholders increased 4% to 148.5 million. Executive memberships rose 9.6% year over year to 41.2 million, reflecting continued member engagement and upgrades.
Management highlighted record gasoline volumes during the quarter, as higher fuel prices made its value proposition more visible to members. Management noted that members who use Costco's gas stations generally visit more frequently, spend more and renew at higher rates, making gas an important loyalty driver.
How Consensus Estimates Stack Up for Costco Post Q3 Earnings
Over the past seven days, the Zacks Consensus Estimate for the current fiscal year has moved up by 5 cents to $20.38, while the estimate for the next fiscal year has also been raised by 5 cents to $22.45. These estimates indicate expected year-over-year growth rates of 13.3% and 10.2%, respectively.
Image Source: Zacks Investment Research
Costco’s Winning Formula: Membership and Digital Expansion
Costco remains one of the compelling long-term investments in the retail space, given its industry-leading value, loyal membership base and consistent execution across both physical and digital channels. The company’s focus on offering high-quality merchandise at compelling prices continues to resonate with consumers who are selective about where and how they spend. This value-driven positioning has allowed Costco to remain relevant across different economic cycles while strengthening its relationship with members. The membership-based model creates a recurring and highly predictable revenue stream.
Membership fee income increased 10.7% year over year to $1,373 million in the last reported quarter. Renewal rates remained strong at 92.2% in the United States and Canada and 89.7% worldwide. Costco is also seeing continued growth in its higher-tier Executive Membership program, which is particularly important because these members tend to shop more frequently, spend more per visit and engage with a broader range of offerings. Executive members now account for approximately 75% of total sales.
The digital ecosystem is also becoming an increasingly important growth engine. Management highlighted strong engagement across its website, mobile app, same-day delivery platform and personalized digital offerings. The company is also leveraging artificial intelligence, enhanced search capabilities and personalization tools to enhance product search and increase conversion rates. Costco is also improving checkout speed through mobile wallet enhancements, digital membership cards and the international rollout of shopping cart pre-scan. These investments should support member traffic and productivity over time. Digitally enabled comparable sales increased 21.5%, while site and app traffic surged 37% during the quarter.
Costco’s warehouse business continues to generate healthy traffic and spending trends. The company currently operates more than 930 warehouses globally and expects to end the fiscal year with approximately 940 locations while targeting more than 30 net new warehouse openings annually over time. Management continues to see significant expansion opportunities across Canada, China, Japan, Korea, Spain, France and the United Kingdom. At the same time, Costco is investing approximately $6.5 billion this year to expand warehouse capacity, remodel high-volume locations, increase logistics capabilities, support Kirkland Signature products and enhance digital infrastructure.
Costco Navigates Competitive Landscape as Peers Scale Up
Costco's impressive sales figures are part of a larger retail picture where competition is intensifying. Rivals like Ross Stores, Inc. (ROST - Free Report) , Dollar General Corporation (DG - Free Report) and Target Corporation (TGT - Free Report) are investing in expanding their product assortments, enhancing supply-chain efficiency, and upgrading in-store and digital experiences to capture greater market share. These retailers are also sharpening their value propositions through competitive pricing, private-label expansion and targeted promotional strategies.
Margins remain a critical area to monitor, with potential concerns stemming from any deleverage in the selling, general and administrative rate. Foreign exchange volatility, potential tariffs on key imports and inflationary pressure create uncertainty.
Does Costco Tick the Boxes for Value Investing?
Costco stock has fallen 5.2% over the past three months compared with the industry’s decline of 4.8%. A sneak peek into key retail peers' performance reveals that shares of Dollar General have tumbled 29.9% during the said time frame, while Ross Stores and Target have climbed 4.8% and 2.6%, respectively.
Image Source: Zacks Investment Research
Despite Costco's strong fundamentals, valuation remains a concern. The stock has historically commanded a premium multiple due to its consistency, brand strength and membership economics. However, that premium can limit near-term upside, especially if investor expectations become too high.
Costco's forward 12-month price-to-earnings ratio stands at 43.53, higher than the industry’s ratio of 30.62 and the S&P 500's 22.23. However, it is trading below its 12-month median level of 46.77, indicating some moderation in valuation. Costco is trading at a premium to Target (with a forward 12-month P/E ratio of 14.54), Ross Stores (28.39 and Dollar General (14.22).
Image Source: Zacks Investment Research
How to Play Costco Stock: Buy, Hold or Sell?
Costco's third-quarter results reinforced the company's long-term strengths. Comparable sales were solid, membership trends remained healthy, digital growth was robust, and management commentary pointed to continued consumer engagement. The business remains well-positioned in a value-conscious retail environment. However, the stock's premium valuation makes the near-term risk-reward more balanced. For investors already holding the stock, the latest quarter supports staying invested, particularly with a long-term horizon. New investors, however, may want to wait for a more attractive entry point.
Costco currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.