Costco reported better than expected earnings. Why was the market indifferent?

U.S. retailer Wholesale beat Wall Street forecasts for revenue and earnings for the first quarter of fiscal 2026. Consumers were actively buying both essential goods and nice extras ahead of the key holiday season. At the same time, investors' reaction to the report was subdued - probably amid expectations of even stronger numbers, Barron's specifies .

Costco Wholesale, the largest chain of self-service club-type warehouses (stores), reported earnings and revenue that beat the expectations of analysts LSEG. Earnings amounted to $4.50 per share against the forecast of $4.27, revenue - $67.31 billion against the expected $67.14 billion, writes CNBC.

First-quarter sales, a measure that excludes membership fees (payments for access to the chain's stores), rose 8.2% year-over-year. Comparable sales increased 5.9% in the U.S. and 6.4% globally.

Jefferies analyst Corey Thurlow noted in a comment to Barron's, "Growth is occurring in multiple directions and we are confident Costco can continue to maintain a healthy pace of comparable sales increases."

Costco shares ended trading on December 11 with an increase of 1.1%. At the premarket on December 12, they were down 0.5%. Since the beginning of the year, Costco shares have fallen almost 4%, while the S&P 500 has risen 17% - an unusual movement for a company that has outperformed the market for many years, Barron's said. Over the past five years, the retailer's stock has gained 135%, outpacing the S&P 500's 88% rise.

The stock's weak performance in 2025 indicates that the market is beginning to question Costco's ability to continue to outperform the underlying index - especially given its high market capitalization, Barron's adds. The stock now trades at about 43 times forward P/E (forward P/E), though the figure was recently above 57. However, that's still well above the S&P 500 average of about 22.5 times earnings, Barron's notes.

At the same time, the company's operating performance remains strong, the publication points out: Costco has been steadily increasing profits and revenue, maintaining its status as one of the most predictable retailers in the consumer market. Another positive point: the company's gross margin is virtually unchanged - 11.32% against the level of 11.33% a year ago, writes Barron's.

Nevertheless, investors are concerned about possible risks associated with costs due to duties, Barron's writes. In November, Costco became one of the largest companies to file a lawsuit against the administration of US President Donald Trump, demanding a review of duties against imported goods. Many retailers have complained about rising costs but have not filed lawsuits - making Costco a rare exception, Bloomberg notes.

Also, some analysts are concerned that the percentage of renewals of "subscriptions" for access to Costco stores has begun to decline. In the fiscal fourth quarter, the rate fell to 89.8% from 90.2%, which UBS analyst Michael Lasser said was the biggest quarterly decline in 15 years. In the first quarter, the figure was 89.7%, Barron's recalls .

CFO Gary Millerchip emphasized that the key driver of the last reported quarter for the company was e-commerce growth. Online sales were up 20.5%, with website traffic up 24% and in-app traffic up 48%. Costco also started the holiday season with records: on Black Friday, online sales of non-food products of the Costco chain in the U.S. exceeded $250 million, CNBC notes.

The results reflect continued strong sales growth, Bloomberg reports. Costco attracts customers with favorable promotions, large package formats and a wide range of its own brand Kirkland Signature, which covers dozens of categories - from food and beverages to household chemicals, clothing, appliances and home goods.

"Costco's recent results are strong and may reflect how consumers are preparing for the holidays.... Shoppers have become more cautious about spending, trying to buy better deals, and Costco is responding well to that demand," said Greg Zakovich, e-commerce and retail expert at marketing platform Omnisend(quoted by Reuters).

Americans of all income levels are now looking to save money on groceries, necessities, gifts and other categories amid rising inflation and a weak labor market, Bloomberg notes. But Costco shoppers "tend to be less susceptible to economic fluctuations," the agency notes, because they have higher incomes and pay membership fees for access to stores.

This article was AI-translated and verified by a human editor