Costco Wholesale Corporation's (COST Quick QuoteCOST - Free Report) December sales results are in, offering valuable insights into its performance during the holiday season. Amid mixed retail trends, investors are contemplating whether Costco is still a compelling buy, or is holding onto existing shares the smarter choice for now? Let’s analyze the latest figures and the company’s strategic outlook to determine the best path forward for investors.

A Sneak Peek Into Costco’s December Sales Figures

Costco’s membership-driven business model remains a key driver of its growth. High membership renewal rates provide a dependable revenue stream, while the company’s streamlined supply chain and bulk purchasing capabilities enable it to offer competitive pricing. The blend of strong customer loyalty and operational excellence ensures that Costco stays ahead in the competitive retail landscape.

For the five weeks ended Jan. 5, comparable sales in the United States grew 9.3%, while Canada and Other International markets saw increases of 4.3% and 1%, respectively. COST’s total comparable sales rose 7.4%. This follows consecutive increases of 3.1% and 5.1% in November and October, respectively. (Read: Costco's Stellar December Sales Reflect Operational Strength)

Costco's e-commerce comparable sales jumped 34.4% or 35.7% when adjusted for gasoline prices and foreign exchange fluctuations. Management informed that e-commerce sales were favorably impacted by an estimated 15 percentage points due to Thanksgiving, Black Friday and Cyber Monday taking place a week later this year compared to last year. This positively impacted total and comparable sales by approximately one and one-half percent.

As a result, Costco's net sales for December increased 9.9%, reaching $27.52 billion, up from $25.03 billion in the same period last year. This follows a sales improvement of 5.6% and 7.2% reported in November and October, respectively, reflecting a strong and consistent sales performance in the past few months.

Membership Model: A Pillar of Costco’s Success

Costco’s membership-based business model ensures a steady revenue stream. Members pay an annual fee for access to Costco's warehouses, where they enjoy significant savings on a wide array of products. With renewal rates surpassing 90% in key markets like the United States and Canada, membership fees provide a steady and substantial contribution to the company’s financial performance.

The membership fees contribute significantly to Costco’s bottom line. These fees act as a buffer against margin pressure from its low-priced product offerings, allowing the company to maintain profitability while keeping costs low. Membership fee income grew 7.8% year over year during the first quarter of fiscal 2025. Paid household memberships rose 7.6%, while Executive Memberships, which contribute 73.1% of worldwide sales, increased 9.2%.

Costco continually adapts to market trends and evolving consumer preferences. The company continually updates its product mix, offering a blend of everyday essentials and unique, high-demand items. Through strategic market analysis and localized product selections, Costco has successfully strengthened its presence both domestically and internationally.

During the first quarter, Costco opened seven warehouses, including one relocation. Of the six new warehouses opened, four were outside the United States. For fiscal 2025, management plans to open 29 warehouses, including three relocations. Costco has also successfully leveraged e-commerce to capture the growing trend of online shopping. Total e-commerce comparable sales grew 13% during the first quarter.

Valuation Analysis: Is Costco’s Premium Price Justified?

Costco stock has been a standout performer, with shares rallying 35% over the past year, outpacing the industry's rise of 19.4%. This impressive growth underscores investor confidence in Costco’s business model.
 

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However, Costco is trading at a significant premium to its industry peers, such as Dollar General Corporation (DG Quick QuoteDG - Free Report) , Target Corporation (TGT Quick QuoteTGT - Free Report) and Ross Stores (ROST Quick QuoteROST - Free Report) . Costco's forward 12-month price-to-earnings ratio stands at 49.53, higher than the industry’s ratio of 29.83 and the S&P 500's ratio of 21.81.
 

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Now, the question that arises is whether Costco’s current price is warranted or overvalued in today’s market.

Costco’s premium valuation reflects investor confidence in the company’s ability to deliver consistent growth and maintain its competitive advantage. While the stock’s current price may seem high, its robust business model, strong customer base and reliable revenue streams justify the premium.

Here’s How Estimates Stack Up for COST

Reflecting the positive sentiment around Costco, the Zacks Consensus Estimate for earnings per share has seen upward revisions. Over the past 60 days, analysts have increased their estimates for the current and the next fiscal year by 15 and 30 cents to $18.01 and $19.66 per share, respectively. These estimates indicate expected year-over-year growth rates of 11.8% and 9.2%, respectively.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
 

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Should You Invest in Costco Now or Wait for a Pullback?

Costco’s robust business model, characterized by its loyal membership base, operational excellence and adaptability to market trends, continues to position the company as a strong player in the retail sector. Despite its premium valuation, Costco’s consistent sales growth, profitable membership fees and expanding global presence provide a compelling investment case. Holding a Zacks Rank #2 (Buy) at present, Costco’s stock offers promising upside potential, making it an attractive option for investors looking for stability and growth in the retail space. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.