Bullish Outlook for Costco and Retail Stocks
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Feb 25 2026
0mins
Should l Buy COST?
Source: NASDAQ.COM
- Costco Stock Surge: Costco shares have risen 16% in 2026, significantly outperforming the market, demonstrating its robust recovery capabilities in the retail sector, particularly against the backdrop of improving tariff policies.
- Five Below's Business Turnaround: Five Below achieved over 20% sales growth in 2025 despite facing tariffs on two-thirds of its imported goods, with CEO Winnie Park's leadership driving effective expansion strategies that are beginning to pay off.
- Wayfair's Strong Growth: After experiencing sales declines in 2024, Wayfair closed 2025 with three consecutive quarters of strong growth, indicating its recovery potential in the furniture market, especially with expectations of a housing market rebound.
- Tariff Policy Impact: The Trump administration's plan to implement a 15% global tariff poses challenges for Costco and Five Below, but it also provides these retailers an opportunity to reassess pricing strategies and profit distribution, potentially rewarding investors through special dividends.
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Analyst Views on COST
Wall Street analysts forecast COST stock price to rise
24 Analyst Rating
19 Buy
4 Hold
1 Sell
Strong Buy
Current: 998.100
Low
769.00
Averages
1061
High
1205
Current: 998.100
Low
769.00
Averages
1061
High
1205
About COST
Costco Wholesale Corporation (Costco) operates membership warehouses and e-commerce sites that offer a selection of nationally branded and private-label products in a wide range of categories. The Company buys the majority of its merchandise directly from suppliers and route it to cross-docking consolidation points (depots) or directly to its warehouses. It operates 891 warehouses, including 614 in the United States and Puerto Rico, 108 in Canada, 40 in Mexico, 35 in Japan, 29 in the United Kingdom, 19 in Korea, 15 in Australia, 14 in Taiwan, seven in China, five in Spain, two in France, and one each in Iceland, New Zealand and Sweden. It also operates e-commerce sites in the United States, Canada, the United Kingdom, Mexico, Korea, Taiwan, Japan and Australia. The Company provides wide selection of merchandise, plus the convenience of specialty departments and exclusive member services.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
MercadoLibre and Lululemon Show Strong Growth Potential
- Market Leadership: MercadoLibre, as Latin America's leading e-commerce and fintech platform, reported a 45% year-over-year revenue increase in Q4, with its online marketplace reaching 121 million unique buyers, highlighting its strong growth potential in underserved populations.
- Surge in Credit Products: Mercado Pago's credit portfolio surged 90% year-over-year last quarter, indicating significant market opportunities in countries like Mexico where basic financial service penetration is low.
- International Expansion Opportunities: Lululemon has achieved a 19% compound annual revenue growth over the past decade, and despite recent slowdowns in the U.S. market, its sales in China grew 46% year-over-year, showcasing its brand's strong international appeal.
- Steady Membership Growth: Costco has attracted 81 million paid members through its low-price strategy, with a 6.2% membership increase in fiscal 2025, indicating substantial expansion potential both domestically and internationally over the next 20 years.
See More
Three Compelling Long-Term Stock Investments
- MercadoLibre Growth Potential: As Latin America's leading e-commerce and fintech platform, MercadoLibre achieved a 45% revenue increase in Q4, highlighting its significant potential to expand financial services to underserved populations, which could drive future revenue and profit growth.
- Lululemon International Expansion: Lululemon has seen a 19% compound annual growth rate over the past decade, and despite a recent 7% revenue increase, its 46% year-over-year growth in China indicates strong international demand, positioning it for greater market share in the global athletic apparel sector.
- Costco Membership Growth: Costco has attracted 81 million paid members through its low-price strategy and membership fee model, with a 6.2% increase in memberships in fiscal 2025, demonstrating robust performance in the U.S. market while also showcasing significant international expansion potential, particularly in China and Europe.
- Long-Term Investment Value: All three companies exhibit strong growth potential and market demand; despite facing short-term challenges, their long-term investment value is substantial, making them suitable for holding to accumulate wealth over time.
See More
Investment Comparison Between Walmart and Costco
- Walmart's Performance Growth: In fiscal Q4 2026, Walmart's revenue rose 5.6% year-over-year, with adjusted EPS at $0.74, up over 12%, indicating improved profitability from its digital transformation, and management expects operating income to grow 6% to 8% going forward.
- Costco's Sales Performance: Costco reported net sales of $68.2 billion for fiscal Q2 2026, a 9.1% year-over-year increase, with adjusted comparable sales up 6.7%, reflecting strong customer loyalty and a stable revenue stream from membership fees, which grew 13.6% to $1.36 billion.
- E-commerce and Advertising Growth: Walmart's global e-commerce sales surged 24% in the quarter, now representing 23% of total net sales, while its advertising business jumped 37%, indicating a significant shift towards higher-margin revenue streams that is positively impacting its financial performance.
- Valuation Comparison: While Walmart trades at about 44 times earnings, lower than Costco's 54 times, its diversified revenue streams and growth in advertising make it a more attractive investment in the current market, necessitating careful evaluation of both companies' growth potential against market expectations.
See More
Investment Comparison: Walmart vs. Costco
- Walmart's Performance Growth: In its fiscal Q4 2026, Walmart reported a 5.6% year-over-year revenue increase, with adjusted earnings per share at $0.74, reflecting over 12% growth, showcasing its ongoing digital transformation and profitability enhancement.
- E-commerce Surge: Walmart's global e-commerce sales soared 24% in the quarter, now representing 23% of total net sales, while its advertising business jumped 37%, indicating a shift towards higher-margin revenue streams that drove a 10.8% increase in operating income.
- Costco's Steady Performance: Costco achieved net sales of $68.2 billion in fiscal Q2 2026, up 9.1% year-over-year, with adjusted comparable sales rising 6.7%, demonstrating strong customer loyalty and a stable revenue stream from membership fees.
- Digital Sales Growth: Costco's digitally enabled comparable sales surged 21.7% in Q2 and maintained a 20.8% growth in February, although its price-to-earnings ratio stands at 54, reflecting the market's high expectations for continued growth.
See More
Costco's Success and Investment Strategy
- Unconventional Retail Model: Costco's business model focuses on selling a wide range of products at low prices, with an average gross margin of only 11%, yet it generates $1.4 billion in high-margin recurring revenue through its membership model, enhancing customer loyalty and frequent visits.
- Significant Scale Advantage: In the latest fiscal quarter, Costco reported net sales of $68.2 billion, and despite carrying only 4,000 SKUs compared to 30,000 at typical supermarkets, this limited selection gives it strong negotiating power with suppliers, maintaining low prices and high customer traffic.
- Stock Valuation Misalignment: While Costco is known for its low-price strategy, its stock trades at a high P/E ratio of 52.6, indicating that the market values its stability and predictability, even though its diluted EPS has grown by 16.4% over the past five years, suggesting its valuation may not be justified compared to faster-growing tech stocks.
- Outstanding Market Performance: As of March 5, Costco's trailing 10-year total return reached 691%, significantly outperforming the S&P 500 index; however, investors should carefully consider whether its high valuation is reasonable to avoid potential investment risks.
See More
Iran War Pressures Off-Price Retailers Amid Rising Oil Prices
- Oil Price Surge Impact: Since the onset of the U.S.-Iran conflict earlier this month, crude oil prices have surged to levels not seen since 2022, with WTI and Brent crude nearing $120 per barrel, leading to a 70 basis point decline in consumer spending among lower-income shoppers, exacerbating economic pressures.
- Retailer Pressure: According to Wolfe Research, off-price retailers like Dollar General and Walmart, which primarily serve low-income consumers, are expected to face greater pressure as rising oil prices may force these shoppers to tighten their budgets, impacting sales performance.
- Stock Price Declines: Dollar General's shares have fallen 5% over the past week, while Walmart and Advance Auto Parts have seen declines of nearly 3% and 7%, respectively, indicating a market sensitivity to rising energy prices and their impact on consumer confidence.
- Challenges from Import Dependence: Retailers reliant on Chinese imports, particularly in flooring and decor, may face significant headwinds as the Shanghai Containerized Index rises due to logistical issues in Southeast Asian ports, further complicating product shipments to the Middle East.
See More
MercadoLibre and Lululemon Show Strong Growth Potential
- Market Leadership: MercadoLibre, as Latin America's leading e-commerce and fintech platform, reported a 45% year-over-year revenue increase in Q4, with its online marketplace reaching 121 million unique buyers, highlighting its strong growth potential in underserved populations.
- Surge in Credit Products: Mercado Pago's credit portfolio surged 90% year-over-year last quarter, indicating significant market opportunities in countries like Mexico where basic financial service penetration is low.
- International Expansion Opportunities: Lululemon has achieved a 19% compound annual revenue growth over the past decade, and despite recent slowdowns in the U.S. market, its sales in China grew 46% year-over-year, showcasing its brand's strong international appeal.
- Steady Membership Growth: Costco has attracted 81 million paid members through its low-price strategy, with a 6.2% membership increase in fiscal 2025, indicating substantial expansion potential both domestically and internationally over the next 20 years.
See More
Three Compelling Long-Term Stock Investments
- MercadoLibre Growth Potential: As Latin America's leading e-commerce and fintech platform, MercadoLibre achieved a 45% revenue increase in Q4, highlighting its significant potential to expand financial services to underserved populations, which could drive future revenue and profit growth.
- Lululemon International Expansion: Lululemon has seen a 19% compound annual growth rate over the past decade, and despite a recent 7% revenue increase, its 46% year-over-year growth in China indicates strong international demand, positioning it for greater market share in the global athletic apparel sector.
- Costco Membership Growth: Costco has attracted 81 million paid members through its low-price strategy and membership fee model, with a 6.2% increase in memberships in fiscal 2025, demonstrating robust performance in the U.S. market while also showcasing significant international expansion potential, particularly in China and Europe.
- Long-Term Investment Value: All three companies exhibit strong growth potential and market demand; despite facing short-term challenges, their long-term investment value is substantial, making them suitable for holding to accumulate wealth over time.
See More
Investment Comparison Between Walmart and Costco
- Walmart's Performance Growth: In fiscal Q4 2026, Walmart's revenue rose 5.6% year-over-year, with adjusted EPS at $0.74, up over 12%, indicating improved profitability from its digital transformation, and management expects operating income to grow 6% to 8% going forward.
- Costco's Sales Performance: Costco reported net sales of $68.2 billion for fiscal Q2 2026, a 9.1% year-over-year increase, with adjusted comparable sales up 6.7%, reflecting strong customer loyalty and a stable revenue stream from membership fees, which grew 13.6% to $1.36 billion.
- E-commerce and Advertising Growth: Walmart's global e-commerce sales surged 24% in the quarter, now representing 23% of total net sales, while its advertising business jumped 37%, indicating a significant shift towards higher-margin revenue streams that is positively impacting its financial performance.
- Valuation Comparison: While Walmart trades at about 44 times earnings, lower than Costco's 54 times, its diversified revenue streams and growth in advertising make it a more attractive investment in the current market, necessitating careful evaluation of both companies' growth potential against market expectations.
See More
Investment Comparison: Walmart vs. Costco
- Walmart's Performance Growth: In its fiscal Q4 2026, Walmart reported a 5.6% year-over-year revenue increase, with adjusted earnings per share at $0.74, reflecting over 12% growth, showcasing its ongoing digital transformation and profitability enhancement.
- E-commerce Surge: Walmart's global e-commerce sales soared 24% in the quarter, now representing 23% of total net sales, while its advertising business jumped 37%, indicating a shift towards higher-margin revenue streams that drove a 10.8% increase in operating income.
- Costco's Steady Performance: Costco achieved net sales of $68.2 billion in fiscal Q2 2026, up 9.1% year-over-year, with adjusted comparable sales rising 6.7%, demonstrating strong customer loyalty and a stable revenue stream from membership fees.
- Digital Sales Growth: Costco's digitally enabled comparable sales surged 21.7% in Q2 and maintained a 20.8% growth in February, although its price-to-earnings ratio stands at 54, reflecting the market's high expectations for continued growth.
See More
Costco's Success and Investment Strategy
- Unconventional Retail Model: Costco's business model focuses on selling a wide range of products at low prices, with an average gross margin of only 11%, yet it generates $1.4 billion in high-margin recurring revenue through its membership model, enhancing customer loyalty and frequent visits.
- Significant Scale Advantage: In the latest fiscal quarter, Costco reported net sales of $68.2 billion, and despite carrying only 4,000 SKUs compared to 30,000 at typical supermarkets, this limited selection gives it strong negotiating power with suppliers, maintaining low prices and high customer traffic.
- Stock Valuation Misalignment: While Costco is known for its low-price strategy, its stock trades at a high P/E ratio of 52.6, indicating that the market values its stability and predictability, even though its diluted EPS has grown by 16.4% over the past five years, suggesting its valuation may not be justified compared to faster-growing tech stocks.
- Outstanding Market Performance: As of March 5, Costco's trailing 10-year total return reached 691%, significantly outperforming the S&P 500 index; however, investors should carefully consider whether its high valuation is reasonable to avoid potential investment risks.
See More
Iran War Pressures Off-Price Retailers Amid Rising Oil Prices
- Oil Price Surge Impact: Since the onset of the U.S.-Iran conflict earlier this month, crude oil prices have surged to levels not seen since 2022, with WTI and Brent crude nearing $120 per barrel, leading to a 70 basis point decline in consumer spending among lower-income shoppers, exacerbating economic pressures.
- Retailer Pressure: According to Wolfe Research, off-price retailers like Dollar General and Walmart, which primarily serve low-income consumers, are expected to face greater pressure as rising oil prices may force these shoppers to tighten their budgets, impacting sales performance.
- Stock Price Declines: Dollar General's shares have fallen 5% over the past week, while Walmart and Advance Auto Parts have seen declines of nearly 3% and 7%, respectively, indicating a market sensitivity to rising energy prices and their impact on consumer confidence.
- Challenges from Import Dependence: Retailers reliant on Chinese imports, particularly in flooring and decor, may face significant headwinds as the Shanghai Containerized Index rises due to logistical issues in Southeast Asian ports, further complicating product shipments to the Middle East.
See More
