By Sabrina Escobar

Costco Wholesale has been a favorite among investors for the better part of the past five years. But with the stock down slightly this year, there are growing signs that Wall Street is starting to doubt the stock's ability to outperform the market.

The company's fiscal-first-quarter report, due Thursday afternoon, could go a long way toward shaping the shares' trajectory in 2026.

Costco stock is off about 3% this year, a surprising reversal from its five-year performance that has seen shares gain as much as 135%, outstripping the S&P 500's 85% gain in that same time period. The stock closed 1.6% lower on Wednesday.

There seems little outwardly wrong with the company's performance. The discount retailer ha s continued to grow both profit and revenue at a healthy clip, maintaining its reputation as one of the few companies in the consumer space that delivers consistent results.

Indeed, Costco's recent monthly sales report saw headline comparable-store sales increase by a little over 6% throughout the fall months. That result suggests demand remains healthy and that the company continues to gain market share.

Analysts expect Costco to report adjusted earnings of $4.27 a share on $67.1 billion in revenue, which includes both total sales and membership fees. Comparable-store sales, or sales growth at stores open for more than a year, are expected to increase by 6% from last year.

But some analysts are worried that Costco's membership renewal rates have also started to moderate. In the fiscal fourth quarter, the renewal rate ticked down to 89.8% from 90.2% in the third quarter, which UBS analyst Michael Lasser says was the largest quarter-over-quarter decline in at least 15 years.

Costco's management team attributed the decline to more people signing on for memberships online, noting that online members renew at a slightly lower rate, on average. Executives added that they expect renewal rates to keep ticking lower until these trends stabilize.

Investors are also worried about how tariffs will affect Costco's operating costs and margins, Lasser added. The company recently sued the Trump administration in a bid to ensure a tariff refund in the case that the Supreme Court rules against the new import tariffs.

Walmart's recent shift to the Nasdaq Stock Market could also carry unforseen repercussions for Costco. Until now, Costco and Amazon.com were the sole large consumer names in the top Nasdaq indexes, Lasser wrote, which could disperse inflows.

These concerns have all weighed on Costco's valuation this year. Shares now trade at about 43 times the next 12 months' earnings, down from their recent highs of 57 times earnings. That's still significantly higher than the S&P 500's multiple of 22.5 times, according to Dow Jones Market Data.

But that could make for a nice set-up heading into earnings, Lasser wrote. He believes Costco can maintain its top-line momentum and keep growing market share, and that the market has already factored the declines in membership renewal rates into the current stock price.

Overall, Costco should deliver "another solid print" -- and if management is able to provide some clarity on Wall Street's concerns, the report could be a catalyst for the stock, he added.

Write to Sabrina Escobar at sabrina.escobar@barrons.com

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December 11, 2025 00:30 ET (05:30 GMT)

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