Costco: A Warehouse of Value, or Just a High Shelf?

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The market, as usual, is behaving like a nervous dragon guarding a pile of slightly tarnished trinkets. As of this accounting – and accounting, let us remember, is merely the art of making numbers confess1 – the S&P 500 is hovering around the ‘not losing money hand over fist’ mark for 2026. Which, in these times, is practically cause for a parade. Certain purveyors of digital dreams – what the Alchemists of Silicon Valley call ‘disruptive innovation’ and the rest of us call ‘things that lose money very quickly’ – have been rather thoroughly…discouraged. The market, in a fit of unusual sense, seems to be favouring establishments that actually make things, or at least facilitate the exchange of tangible goods, like Costco.

Shares in the membership-based wholesale retailer have, defying gravity and common sense, risen about 15% this year. Investors, it seems, are beginning to appreciate a business that reliably sells stuff, regardless of whether the world is ending, starting, or simply having a particularly grumpy Tuesday. The combination of low prices, a membership fee (essentially a small annual tribute to the gods of bulk purchasing), and the relentless demand for everyday essentials – the stuff that keeps civilisation from collapsing into a heap of unpaid bills – is a potent brew. It’s the sort of business that thrives when everyone else is panicking about the price of digital sheep2.

But is this upward momentum merely a temporary respite, a brief pause before the inevitable tumble into the abyss? Or is Costco stock, despite its current elevation, a worthwhile acquisition for the discerning investor?

Steady Sales Growth, or the Relentless March of Consumption

Costco recently deigned to reveal its sales figures, and, predictably, they were impressive. Sales for January rose 9.3% year over year. This was fueled by a 7.1% increase in same-store sales – a metric that essentially measures how much more stuff people are buying in the same shops. Excluding the rather unpredictable influence of gasoline prices and fluctuating exchange rates (the whims of the Monetary Gnomes are not to be trifled with), same-store sales rose 6.4%.

Interestingly, this growth accelerated from 6.2% in December. One might suspect a correlation with the particularly severe winter storms that swept across the continent, prompting citizens to stock up on provisions for the impending apocalypse. However, even if a significant portion of this increase was driven by panic-buying, the underlying trend remains robust. People, it seems, will always need toilet paper.

Even more intriguing is the growth in ‘digitally enabled sales’ – a phrase that sounds suspiciously like marketing jargon. Costco defines this as sales initiated through a digital device, whether fulfilled through a warehouse or the mysterious realms of distribution centers, or via the Costco Travel platform. These sales now account for 10% of the company’s overall revenue – a significant proportion in a world still largely reliant on pushing trolleys around vast warehouses.

In January, digitally enabled sales rose 33.1% year over year – a substantial acceleration from 18.3% in December. This suggests that Costco’s efforts to lure customers into the digital sphere are bearing fruit. One key initiative was the introduction of a $10 monthly credit toward Costco delivery orders, available via its own website or through intermediaries like Instacart and DoorDash3. It’s a subtle form of bribery, but effective.

This all builds on years of steady sales growth. Even with the abnormally high rates experienced during the COVID-induced panic-buying of 2021 and 2022, sales have remained strong, rising 7%, 5%, and 8% in fiscal years 2023, 2024, and 2025, respectively. It’s a testament to the enduring power of bulk purchasing and the human desire to accumulate things.

One Reason to Avoid the Stock, or Why Even a Good Thing Can Be Overpriced

Despite Costco’s ability to consistently grow sales, I remain hesitant to recommend the stock at its current price. Especially after a 15% year-to-date gain. Why? Valuation.

No matter how magnificent a business, a valuation that has strayed too far into the realm of fantasy leads to significant risk. A stock’s valuation can be reassessed downwards even if the underlying business is thriving. It’s like building a castle on a foundation of wishful thinking.

With shares trading at a price-to-earnings ratio of 53, the current valuation implies strong earnings-per-share growth of around 15% annually for years to come. Yet Costco’s earnings per share rose just 10% in fiscal 2025. The numbers, it seems, are not quite aligning with the hype.

Costco is undoubtedly a great business. But at its current price, it’s not necessarily a great stock. It’s a perfectly good warehouse, but perhaps not a bargain basement.


1 Accounting, as any seasoned ledger-keeper will tell you, is less about discovering the truth and more about constructing a narrative that satisfies the authorities.
2 Digital sheep, of course, are NFTs. Don’t ask.
3 These delivery services, it should be noted, are essentially modern-day messengers, albeit with more sophisticated logistics and a penchant for charging exorbitant fees.

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2026-02-06 07:12