Jim Cramer: 'Costco's in a funk' but still a good name in a bad neighborhood
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CNBC Finance
4 min read
Monthly sales growth at Costco slowed in June â a sign that even one of retail's strongest operators isn't immune to the economic realities that have consumers rattled. Costco reported late Wednesday that total June sales rose 10.6% year over year to $29.4 billion, coming in slightly below expectations. Drilling down on June comparables in the U.S., excluding gasoline, sales increased 7.6%, down from an 8.7% gain in May, and modestly below Mizuho analysts' expectations of 8% to 9%. All categories slowed slightly last month. Shares of the membership-only retailer fell more than 4% on Thursday. While the stock is still up about 5.5% year-to-date, that performance trails the S & P 500 's nearly 10% gain. "Costco's in a funk," Jim Cramer said Thursday on CNBC, noting the company is doing business in a tough economic climate. Still, portfolio director Jeff Marks signaled the importance of diversification. "They're doing well, but was it as good as May? No, and that's why the stock is down," Jeff said during Thursday's Morning Meeting for Club members. "This is a very defensive name that can still put up strong comps even when the economy is good or bad," he added. For his part, Jim said he would be interested in buying Costco stock if it broke below $900 per share. The stock was trading around $913 in afternoon trading. Put simply, Jim thinks Costco is a good name in a bad neighborhood, pointing to the tepid gains in the retail sector overall. The popular S & P Retail ETF (XRT) is only up 1.7% year to date. That underperformance was reflected in KeyBanc Capital Markets' latest consumer survey, which was conducted late last month and published Monday. During the March to June quarter, spending intentions and financial confidence both weakened, KeyBanc found, as consumers remain worried about high food costs, their own personal income, and elevated gas prices. Those concerns align with the latest consumer sentiment surveys and Costco's June traffic and ticket trends. Domestic traffic rose 3.2% in June, about 50 basis points slower than the previous month. Excluding gasoline, foreign exchange, and inflation, average ticket growth eased to 3.7% from 4% in May. It wasn't all bad. Costco's ancillary businesses, including gasoline and pharmacy, were sources of strength last month. So were digital sales, with e-commerce up 21.5%, accelerating slightly from May's 20.9%, likely benefiting from Costco's online Membership Appreciation Days event held from June 22 through June 26. COST YTD mountain Costco YTD While too soon to be concerned about Costco's moderating June comps growth over the long haul, it does reinforce for investors that the stock's premium valuation leaves little room for disappointment. Costco stock is trading at 41 times forward earnings, according to FactSet. That's higher than Walmart 's multiple of 36.5 times and double the S & P 500's price-to-earnings ratio of nearly 20.5. "Very few retailers can post relatively disappointing +7.6% comp gain in any given month â including very healthy traffic levels worldwide â yet the elevated valuation at which COST trades makes for a high bar," Mizuho wrote in a research note following the release. Analysts described the monthly report as "fine" but "simply not as strong as it could have been." Wells Fargo struck a similar tone, saying Costco's results fell short of lofty expectations without changing the retailer's competitive position. Another important metric that investors will continue to watch is membership growth, which has also been slowing. Membership numbers are only released quarterly. In its fiscal 2026 Q3 earnings report, released in late May, Costco delivered just enough. Paid members came up short at 82.9 million but grew 4.1% year over year. Worldwide membership renewal rate managed to hold steady at 89.7%. Costco will release July sales on Aug. 5. The company's earnings report for the final quarter of its 2026 fiscal year will be out on Sept. 24. (Jim Cramer's Charitable Trust is long COST. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
