Costco: A Rather Expensive Indulgence

One observes with a certain detached amusement that Costco, that temple of bulk purchasing and questionable bargains, has enjoyed a rather spirited ascent this year. Up some thirteen percent, as I’m reliably informed, while the broader market merely dawdles along at one and a half. Quite the performance, really. Though one does wonder if the enthusiasm isn’t a touch… premature.

The question, naturally, isn’t whether Costco is a fundamentally sound business – it is, in its own way. The more pertinent inquiry is whether the current valuation reflects anything resembling reality. Or, to put it less delicately, have the latecomers missed the boat? One rather suspects they have. But let’s dissect the matter with a modicum of composure, shall we?

The recent results, predictably, are perfectly adequate. Net sales up eight percent, comparable sales a respectable six. Membership fees, of course, continue to swell – a rather ingenious mechanism, if you think about it. One pays to have the privilege of spending money. The modern world is endlessly inventive. And the digital sales, bless them, are growing at a rate that suggests Costco hasn’t entirely succumbed to the online hordes. All perfectly competent, but hardly earth-shattering.

The December sales figures, similarly, were… satisfactory. Six percent bump, eighteen percent for the digitally enabled. One pictures the accountants nodding with approval. The real trick, of course, is maintaining this momentum. It’s all very well to sell mountains of toilet paper, but one does require a consistent demand for toilet paper, doesn’t one?

The durability of Costco’s business model is, admittedly, rather impressive. Recurring revenue from memberships, unwavering customer loyalty, and a relentless focus on low prices. One can’t fault the logic. People will always require groceries, paper towels, and the occasional oversized jar of mayonnaise. It’s the bedrock of civilization, really.

However, and this is a rather substantial ‘however’, a loyal customer base and a penchant for discounted cleaning supplies do not, in and of themselves, justify a price-to-earnings ratio north of fifty. It leaves precious little room for error. A single misstep, a slight softening in consumer spending, and the whole edifice could wobble rather alarmingly. One finds the lack of a safety margin distinctly unsettling.

So, is Costco a buy? Honestly, one struggles to see the appeal at this price. One would prefer to wait for a more… reasonable entry point. Perhaps somewhere below eight hundred. It’s entirely possible, of course, that the stock never reaches such heights. But one is perfectly willing to take that chance, investing one’s funds in opportunities that offer a slightly more generous return. After all, life is too short to overpay for bulk toilet paper.

2026-01-27 03:12

Read More