Costco (COST) Stock Drops 4% as June Sales Momentum Decelerates

Key Takeaways

Table of Contents

Shares of Costco declined 4.23% following the release of June sales figures that revealed deceleration from the previous month
Total net sales climbed 10.6% compared to last year, reaching $29.24 billion during the five-week period ending July 5
Comparable store sales advanced 8.8%, representing a notable decline from the prior month’s 12.5% gain
Evercore ISI’s Greg Melich warned of an intensifying competitive landscape as Walmart and Kroger slash prices
Despite the pullback, Melich maintained his Buy recommendation with a $1,100 target, suggesting upside exceeding 20%

Shares of Costco (COST) retreated 4.23% during Thursday’s trading session, settling at $912.80, following the warehouse club’s disclosure of June sales metrics that reflected a sequential slowdown.

Costco Wholesale Corporation, COST

During the five-week period concluding July 5, the retailer recorded total net sales of $29.24 billion — representing a 10.6% year-over-year increase. Comparable store sales expanded 8.8%. While these figures demonstrate healthy growth in isolation, they fell short of expectations for a company commanding premium valuation multiples.

The primary concern centered on the sequential comparison. In May, net sales and comparable store sales had surged 14.5% and 12.5% respectively. Wall Street has limited tolerance for deceleration, and Thursday’s price action reflected that sentiment.

When adjusting for fluctuations in gasoline prices and foreign exchange movements, the narrative appears somewhat more stable. On an adjusted basis, same-store sales registered 7% growth in June compared to 8% the previous month — a less dramatic slowdown.

The warehouse giant has captured benefits throughout the year from elevated oil prices, which increased traffic to its fuel stations and subsequently drove store visits. That favorable dynamic is now dissipating.

Intensifying Competition on the Horizon

Evercore ISI’s Greg Melich identified an additional challenge ahead: escalating price competition with Walmart and Kroger. He characterized the developing scenario as a potentially “messy food fight” for grocery customers throughout the summer months.

Walmart recently unveiled plans to reduce prices across categories including food, appliances, outdoor equipment, toys, and apparel at the majority of its domestic locations. Similarly, Kroger has embraced aggressive promotional strategies to protect market share, an approach that contributed to modest same-store sales growth during its first quarter.

Costco isn’t remaining passive. Bernstein’s Zhihan Ma observed in April that Costco “remains the most price competitive” among major retailers including Walmart and Amazon. This competitive positioning becomes increasingly critical as consumers grow more price-conscious.

Melich emphasized that Costco must sustain its sales momentum to support its current valuation, especially as favorable tailwinds from gasoline prices and tax refund spending cycles begin to fade.

Wall Street’s Perspective

Despite Thursday’s selloff, analyst sentiment toward COST remains constructive.

Melich reiterated his Buy rating while maintaining his $1,100 price target — suggesting potential upside exceeding 20% from Thursday’s closing level.

The overall Wall Street consensus stands at Moderate Buy, derived from ratings published during the past three months. The breakdown includes 14 Buy recommendations, 7 Hold ratings, and 1 Sell opinion. The consensus price target among analysts reaches $1,100.62, also indicating approximately 21% potential appreciation.

Domestic same-store sales drove June’s results, advancing 10.6% — representing the strongest performance across Costco’s international operations. On a global basis, comparable sales adjusted for currency fluctuations and fuel prices registered 7% growth.

The company’s membership-based business model and value-oriented strategy have sustained customer loyalty throughout a challenging consumer environment. While June’s 8.8% comparable sales growth represents a deceleration from May, it continues to demonstrate robust fundamental demand.

The consensus analyst price objective of $1,100.62 implies roughly 21% appreciation potential from Thursday’s $912.80 closing price.

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