TLDR
- Costco stock dropped 4.23% after June sales data showed growth slowing from May’s stronger numbers
- Net sales rose 10.6% year over year to $29.24 billion for the five weeks ended July 5
- Comparable sales grew 8.8%, down from 12.5% in May — triggering the sell-off
- Evercore ISI analyst Greg Melich flagged a potential “food fight” with Walmart and Kroger cutting prices
- Melich kept his Buy rating and $1,100 price target, implying over 20% upside from current levels
Costco (COST) stock slid 4.23% on Thursday, closing at $912.80, after the warehouse retailer reported June sales figures that came in below May’s pace.
Costco Wholesale Corporation, COST
For the five weeks ended July 5, Costco posted net sales of $29.24 billion — up 10.6% year over year. Comparable sales rose 8.8%. Strong numbers on their own, but not strong enough for a stock trading at premium multiples.
The issue was the comparison to May, when net sales and comps jumped 14.5% and 12.5% respectively. Markets don’t love deceleration, and Thursday’s move showed that clearly.
Strip out gas prices and foreign currency effects, and the picture looks a bit steadier. Adjusted same-store sales came in at 7% for June versus 8% in May — a more modest step down.
Costco has benefited this year from higher oil prices, which drove more members to its pumps and into its warehouses. That tailwind is now fading.
A Price War Is Brewing
Evercore ISI analyst Greg Melich flagged another pressure point: a brewing price war with Walmart and Kroger. He described the situation as a potential “messy food fight” for grocery shoppers this summer.
Walmart this week announced plans to cut prices on food, appliances, outdoor gear, toys, and clothing across most of its U.S. stores. Kroger has also been leaning on aggressive price cuts to defend its turf, a strategy that helped it grow same-store sales modestly in Q1.
Costco isn’t sitting still. Bernstein analyst Zhihan Ma said back in April that Costco “remains the most price competitive” retailer compared to Walmart and Amazon. That reputation matters when shoppers are watching their wallets.
Melich noted that Costco will need to maintain its sales performance to justify its current market valuation, particularly as the gas price boost and tax refund spending tailwinds lose steam.
What Analysts Are Saying
Despite the drop, Wall Street isn’t running for the exits on COST.
Melich reaffirmed his Buy rating and held his price target at $1,100 — implying more than 20% upside from Thursday’s close.
The broader analyst consensus sits at Moderate Buy, based on ratings issued over the past three months. That breaks down to 14 Buys, 7 Holds, and 1 Sell. The average price target across the Street is $1,100.62, also pointing to roughly 21% upside.
U.S. same-store sales led June’s performance, rising 10.6% — the strongest showing across Costco’s global markets. Global comparable sales, adjusted for currency and gas, came in at 7%.
Costco’s membership model and value-focused positioning have kept shoppers loyal through a choppy consumer environment. The June comp of 8.8%, while slower than May, still reflects solid underlying demand.
The average analyst price target of $1,100.62 represents approximately 21% upside from Thursday’s closing price of $912.80.
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