Costco’s June Sales Miss Is Noise – Here’s Why Wall Street Is Still All In On Its Stock
(SeaPRwire) – By: Christian Pierce
The retail sector’s favorite stalwart just threw investors a minor curveball, and the chatter around its supposed slowdown is way overblown. Costco posted June sales that fell short of some analyst projections earlier this month, triggering a wave of hot takes claiming its multi-year growth run is finally running out of steam. The stock is hovering in the $1050 to $1060 range right now, and InvestingPro data even flags it as overvalued relative to its fair value estimate. That split between skittish retail investors and unshakable bullishness from Wall Street analysts is the exact contradiction we need to unpack here, because most of the panic around the miss is rooted in surface-level reading of top-line numbers. Too many casual observers are writing off Costco’s long-term moat for a single month’s slightly underwhelming print, without digging into the underlying metrics that actually drive its profitability.
Let’s run through the hard data first, no spin. Core comparable sales rose 7.6% in the U.S. and 7.0% globally, excluding gas and foreign exchange effects. U.S. traffic climbed 3.2% in June, keeping its two-year stacked traffic comp above 6% for the seventh consecutive month, a streak analysts have monitored as a leading indicator of membership loyalty. Gas sales jumped in the low-30% range year-over-year, driven by a 22% jump in average selling price and high-single-digit growth in gallons sold. U.S. ticket growth excluding gas came in at 4.3%, with only 1-2% of that figure coming from inflation, the rest from more items per basket and shifts to higher-margin product mixes. International results were softer, but not for the reason bears claim: Canada core comps hit 4.9%, down 120 basis points from the prior three-month average, while other international markets posted 5.6% growth, down 110 basis points from recent trends. Goldman Sachs analyst Kate McShane noted that much of the miss versus consensus comes from cannibalization by new store locations, not soft underlying demand, and management has seen no meaningful shift in consumer behavior or competitive pressure. The analyst ratings back that confidence up: Evercore ISI reiterated Outperform with a $1,100 price target, Goldman kept Buy at $1,159, J.P. Morgan held Buy at $1,100, Baird kept Outperform at $1,100, Gordon Haskett even raised its Buy target to $1,200, and Telsey reaffirmed Outperform at $1,135 despite June falling short of its 10.6% projection. Only DA Davidson and Citi held neutral ratings, with $1,000 and $1,020 targets respectively, citing sales deceleration from May’s 8.7% core comp. Costco’s trailing twelve month revenue growth sits at 9.23%, supporting a $422.69 billion market cap, and its ongoing experiments with standalone gas stations signal ongoing investment in member retention that will pay off for years.
Costco’s entire business model runs on membership loyalty, not quarterly sales beats, and that’s the piece most panic sellers are missing. The seven-month streak of 6%+ two-year stacked traffic proves members are still choosing Costco over competing retailers even as grocery inflation eases and discretionary spending tightens for many households. The new store cannibalization effect is temporary; each new location adds thousands of new paying members over its first two years of operation, and the minor short-term hit to same-store sales will be more than offset by net membership fee growth and higher overall system-wide sales long term. The tougher year-over-year comps coming in July and August, with traffic comps 100 basis points harder in July and 150 basis points harder in the U.S. in August, are already baked into most analyst price targets, so any slight beat over the summer will deliver immediate upside for holders. Costco has built a customer base that prioritizes value and consistency over flashy promotions, and that base has only grown more loyal through periods of economic volatility. For investors, ignore the noise around the June sales miss; if you already hold COST, keep your position, and if you’re looking to enter, pick up shares on any dips below $1040 before the summer comp period wraps.
Author bio: Christian Pierce, a chief financial columnist and markets commentator with 12 years covering consumer retail and large-cap public equities.