According to CNBC, Costco reported fiscal first-quarter 2026 results for the period ending November 23 that beat Wall Street expectations. Revenue hit $67.31 billion, up 8% year-over-year and above the $67.14 billion consensus, while adjusted earnings per share jumped 11% to $4.50, beating the $4.27 estimate. Key drivers included a 6.4% rise in comparable sales, fueled by both traffic and ticket growth, and a slight improvement in gross margins to 11.32%. However, paid memberships, though up 5.2% to 81.4 million, missed estimates, and the membership renewal rate dipped again to 89.7% worldwide. The stock responded with a less than 1% drop in after-hours trading.
The Good News Isn’t Good Enough
Here’s the thing about Costco: the bar is astronomically high. When you’re trading at a price-to-earnings multiple of around 43, you can’t just have a “good” quarter. You need a flawless one. And this quarter, while strong on paper, had just enough cracks to give the bears something to chew on. Beating on sales and earnings? That’s basically table stakes for this company. The market yawned. What it really cares about are the long-term engines of the business: member loyalty and consistent, unshakeable sales growth. On both fronts, there were tiny, but noticeable, warning lights.
The Renewal Rate Problem Won’t Go Away
The most nagging issue is that membership renewal rate. It’s now declined for several quarters in a row, and management expects the “slight decline” to continue. They have a logical explanation—online members, who are younger and more fickle, are dragging the average down—and they even said their mitigation efforts are working better than expected. But let’s be real. When a core, legendary metric like Costco’s renewal rate starts trending down, it’s a big deal. It’s the foundation of the entire model. The company missed its paid membership count target for the quarter, and this is almost certainly why. It suggests that the value proposition, while still incredibly strong, might be facing more friction in a crowded retail landscape.
Deceleration and Lofty Expectations
Then there’s the sales slowdown. Costco’s U.S. sales growth (excluding gas and currency) decelerated from 6.4% in October to 5.8% in November. Now, is that a disaster? Of course not. As the CFO pointed out, it’s still within a healthy range. But for a stock priced for perfection, any deceleration gets magnified. It feeds a narrative: is the consumer finally pulling back? Even a company as resilient as Costco isn’t completely immune. When you combine this with the renewal rate issue, you get a story that’s just not quite powerful enough to justify pushing the stock higher from its already sky-high valuation. It’s a “prove it” moment.
The Path Forward
So what does Costco need to do? Basically, it needs a knockout December. The article points to the upcoming January 7 sales release as a key catalyst to change the narrative. A strong holiday showing could quiet the slowdown talk. Beyond that, the company is still executing—opening new warehouses, launching Kirkland Signature items, and seeing huge growth in digital sales. The fundamental ethos is intact. But the investment thesis right now is stuck between undeniable operational strength and a valuation that demands nothing less. I think the analysts quoted have it right: there’s not enough here to “pound the table,” but enough to believe in a long-term comeback. For now, the market is waiting for the next piece of evidence.
