Costco's 9.8% Same-Store Sales Growth in Q3 2026 Shows Why Investors Love the Retail Stock So Much
Key Points
Even excluding the impact of higher gas prices, Costco’s same-store sales still grew at a healthy clip.
Despite heightened macroeconomic uncertainty, this business continues to report solid financial gains.
This retail stock’s valuation reflects the market’s appreciation of Costco’s safety and stability.
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Costco (NASDAQ: COST) reported financial results for its fiscal 2026 third quarter (ended May 10) on May 28. Total revenue increased 11.6% year over year to $70.5 billion. Diluted earnings per share rose by 15.2%. These were healthy headline figures.
However, the company's same-store sales, an important metric to follow, climbed 9.8% (6.6% excluding changes in gas prices and foreign exchange) during Q3. This was another strong showing. And it reveals why investors love Costco so much.
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A resilient business model
The retail sector is extremely competitive. But Costco stands out. It has a tremendous scale that allows it to negotiate favorable terms from vendors, which supports low prices for shoppers. Consumers appreciate the no-frills warehouse environment, which offers high-quality merchandise in a wide range of product categories.
This supports durable same-store sales growth, which is the envy of the retail industry. Costco's 9.8% same-store sales gain was driven by strong gas sales, higher ticket sizes, and higher traffic.
Consumers, investors, and analysts would probably agree that the U.S. economy isn't exactly in tip-top shape. There are many reasons why:
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Inflation, as measured by the Consumer Price Index, increased 3.8% in April, the fastest pace of growth since May 2023.
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Credit card debt is at $1.25 trillion.
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Consumer confidence is at an all-time low.
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The fiscal deficit was $1.8 trillion in fiscal 2025.
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There are ongoing geopolitical conflicts.
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And there are fears about the impact artificial intelligence will have on the labor force.
Look at recent history, though, and you'll remain optimistic about Costco's prospects. It successfully navigated the COVID-19 pandemic, posting same-store sales growth of 7.7% in fiscal 2020 and 16% in fiscal 2021. Then, it dealt with a hike in interest rates amid soaring inflation. It seems there is not much that can derail this business.
The stock's valuation might always be expensive
Costco continues to prove how durable and economically resilient its business model is, which is why the stock has performed so well. It has generated a wonderful total return of 634% in the past decade (as of June 2).
Regardless of macro conditions, the company is financially successful. This influences market sentiment, which shows up in the valuation. This top retail stock trades at a price-to-earnings (P/E) ratio of 48. Based on any rational view of this business, Costco's valuation should not be this high. The stock trades at a sizable premium to Nvidia, perhaps the most impressive story in all of capital markets in recent memory, which trades at a P/E multiple of 34.
It's becoming clear that the investment community values Costco's safety and stability highly, while downplaying its lack of hyper-growth or huge profit margins. I don't know if this perception will change anytime soon.
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Nvidia. The Motley Fool has a disclosure policy.
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