Costco is finally back. Stock retailer warehouse is one of only three names of the Club in the green in the terrible market there. (Other defense names Cardinal Health and Kimberly-Clark are two others). At its session high, Costco advanced nearly 2% closer to its May record of $1,094 — a far cry from a few months ago when it appeared stuck below $900. The rally in Costco has been driven by two things. First, there is a rotation towards safer stocks and away from AI trading. While the cancellation of Wall Street’s post-election rally on Thursday was the most severe example, it has become less common in recent weeks. Will it last forever? Who knows, based on the past two days on the market. The second thing for Costco is the company’s strong fundamentals – the latest being the October sales. This is the second point – the one with more management control – that we want to dig into. For October, Costco reported net sales of $24.5 billion, an increase of 12.6% from the previous year, with comparable sales up 11.1%. Excluding gas sales and currency fluctuations, Comps rose 7.3% which was better than expected, according to Goldman Sachs analysts. When asked earlier on “Squawk on the Street” whether Costco stock could exceed its May record, Jim confidently replied, “Yes, we will.” While the stock has been steadily rising since September 16, the rally really kicked into high gear about a week later after the company reported solid fiscal 2026 fourth quarter earnings and progress overcoming the slow membership growth rate and the wobbly renewal trend. “Costco is a volume store. It’s not a price store,” Jim said, referring to the retailer’s use of competitive pricing to attract more customers while also generating revenue from membership fees. “I continue to think that Costco represents great value.” Costco’s gasoline business is a prime example of when fuel prices rose due to oil costs fueled by the Iran war. During a September earnings call, CEO Ron Vachris said gas had a record year. “During the fiscal year, we estimate we saved members more than $3.2 billion over the average price at the pump in the markets we operate in,” Vachris said. “We are also expanding our 26 existing U.S. gas stations this year in our highest volume locations to increase throughput and improve the overall member experience.” While gas is not very profitable, it is the key to getting more traffic to the store because consumers who are going to the Costco gas pump below retail price can also come into the store. COST YTD mountain Costco YTD Shares, however, are not cheap at nearly 47 times fiscal 2027 forecast earnings. It never was. Jim talked about how the late Charlie Munger’s views on Costco’s high price-to-income prices have shaped his. “Munger said this is the only stock in the whole lexicon he felt you should not pay much attention to P/E,” Jim said. “I have adopted that for a long time.” Munger, longtime Warren Buffett’s right-hand man at Berkshire Hathaway, serves on Costco’s board. Munger is willing to see multiple stock premiums and own the stock for the long term because he strongly believes in the business model, the moat, and customer loyalty. We share that admiration, which is why we’ve owned Costco stock for years. But we also know that high value means no mistakes when companies experience operational disruptions. The number must be almost perfect or else its sacred status may be in question. That’s why the decline in membership renewal rates since last year is of great concern to us. But it’s also why stocks have reacted so well since the fiscal Q4 earnings report showed a sequential increase in renewal rates around the world. (Jim Cramer’s Charitable Trust is long COST. Read here for a full list of stocks.) As a CNBC Investing Club subscriber with Jim Cramer, you will receive trade alerts before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling shares in his charitable trust portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing a trade alert before executing a trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO THE TERMS AND CONDITIONS AND PRIVACY POLICY, ALONG WITH THE DISCLAIMER. No fiduciary obligation or duty is, or is created, pursuant to the receipt of any information provided in connection with the investment club. No special results or profits are guaranteed.
Costco aims for record high in May – how it got here and where it’s going