Costco Wholesale (COST) delivered a mixed performance in its latest quarter, with revenue and membership growth falling slightly short of expectations, though profit margins held firm. Despite the lack of standout results, a major analyst firm raised its price target on the retailer, signaling cautious confidence in long-term fundamentals.
- Costco’s Q2 revenue: $84.6 billion, up 4.1% YoY
- Adjusted EPS: $3.82 vs. $3.74 expected
- Same-store sales growth: 2.9% (down from 3.5% YoY)
- Total active memberships: 137.3 million (+3.8% YoY)
- Operating margin: 3.6% (stable YoY)
- Price target raised to $620 from $590
Costco reported fiscal second-quarter results on Thursday, posting revenue of $84.6 billion, a 4.1% year-over-year increase, slightly below the $85.2 billion consensus estimate. Adjusted earnings per share came in at $3.82, exceeding the $3.74 forecast, driven by strong cost discipline and modestly improved membership fees. The company added 1.7 million new members during the quarter, bringing total active memberships to 137.3 million, a 3.8% rise from the prior year. Despite the positive EPS outcome, same-store sales grew only 2.9%—a deceleration from previous quarters and below the 3.5% growth seen during the same period last year. The slower sales performance was attributed to a shift in consumer spending patterns, with discretionary categories lagging and inflationary pressures continuing to influence purchasing behavior. Nonetheless, Costco maintained its core operating margin at 3.6%, unchanged from the prior year, reflecting effective inventory and supply chain management. In response, a leading investment research firm upgraded its price target on COST to $620 from $590, citing the company’s resilient membership base, disciplined capital allocation, and consistent profitability despite a challenging macro environment. The move reflects confidence in Costco’s ability to navigate elevated inflation and shifting consumer demand, even as it faces increasing competition from e-commerce platforms and discount retailers. The S&P 500 (^SPX) closed flat following the report, with the broader retail sector showing minimal movement. The VIX (^VIX) remained stable at 15.8, indicating no significant volatility spike. Investors appeared to digest the results as a reaffirmation of Costco’s operational strength, albeit without a catalyst for major upward momentum.