By Teresa Rivas

Costco Wholesale is in a slump, but unlike its hot dog deal, it won't last forever.

Costco was lower on Monday, its third day in a row, and marking seven of the past eight days. At a recent $949.50, it was on track for its lowest closing price since the end of January.

Although the shares are still up more than 10% year to date, they have fallen by just as much from a year ago. They are off 13% from their closing high of $1,094.32, hit earlier this month.

Costco reported a mixed quarter after the close on Thursday, with earnings per share missing the mark by six cents, even as revenue was better than expected.

With the shares trading up into the report (the closing high was just over a week before) it is understandable they would give up some ground. However, it would be wrong to count Costco out all together.

While the company's results did show inflation impacting even its generally higher-end customers, Mizuho analyst David Bellinger writes Costco's investment in keeping prices low makes sense -- it's what the company has historically prioritized so its shoppers see enough value to renew their memberships.

Likewise, Jefferies analyst Corey Tarlowe highlights the company's edge on pricing is what drives traffic and market share gains in a price-sensitive environment.

That is a bit of a double-edged sword at the moment, as it pressured margins in the quarter. But it is a necessary investment for maintaining Costco's high renewal rates.

"Elevated gas engagement is reinforcing member loyalty and frequency, supporting both near-term comps and long-term ecosystem strength," Tarlowe notes.

The wisdom behind that strategy is in the numbers.

Warehouse clubs may only account for 5% of overall U.S. retail, but have grown 6% annually since 2007 and 11% annually since 2018, well ahead of total retail sales and grocery, writes D.A. Davidson analyst Michael Baker.

"Costco has taken share from other warehouse clubs and in retail overall, growing 9% annually since 2007," Baker notes.

Baker added Costco to his firm's best-of-breed list following the selloff, noting that as a whole, the warehouse model has one of the deepest moats in retailing, given its barriers to entry, concentrated number of items, and predictable membership income.

Members help perpetuate the virtuous cycle, as they provide Costco with plenty of data that the company can use to tailor discounts and fine-tune merchandise.

He is concerned about the valuation, even after the stock's decline, as it trades around 42 times forward earnings.

Nonetheless, that is slightly below the average in recent years, and consensus estimates still call for it to deliver double-digit earnings growth this fiscal year and next.

And as Baker notes, Costco has paid $19.7 billion to shareholders through dividends over the last five years and another $3.2 billion in buybacks.

Talk about a good deal.

Write to Teresa Rivas at teresa.rivas@barrons.com

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June 01, 2026 13:54 ET (17:54 GMT)

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