Costco Reports Strong Q4 Results, But Membership Growth Concerns Prompt Price Target Cut

Costco Wholesale Corporation reported better-than-expected fourth-quarter financial results on Thursday evening, yet the company’s valuation multiple was adjusted downward as investors remain focused on slowing membership growth metrics.

Total revenue for the August quarter rose 11.1% year-over-year to $95.72 billion, surpassing Wall Street estimates of $94.86 billion from LSEG data. Adjusted earnings per share increased 15% to $6.75, also beating consensus estimates. The adjusted EPS figure remained strong even after excluding a 15-cent benefit derived from tariff refunds following a February Supreme Court ruling that declared President Donald Trump’s emergency levies unconstitutional.

Membership fee income grew 7.3% to $1.85 billion, slightly missing FactSet estimates of $1.86 billion. Despite the miss, both global and U.S./Canada renewal rates showed sequential improvement. Worldwide renewal rates ticked up to 89.8% from 89.7%, while the U.S./Canada renewal rate rose to 92.3% from 92.2%.

The stock traded little changed in after-hours activity, finishing the regular session at $896.48. This represents an 18% decline from its closing high of $1,063.48 on May 19. Rival Walmart has seen similar weakness, down nearly 20% over the same period.

While overall paid memberships reached 84.1 million, falling short of expectations and marking 3.8% year-over-year growth, the composition of the membership base improved. Executive tier memberships, which cost $130 annually compared to the $65 basic tier, hit an all-time high of 42.3 million. CEO Ron Vachris noted on the earnings call that increasing executive penetration is likely to support future renewal rates.

The retailer also highlighted success in attracting younger shoppers. The member base under 40 has grown nearly 60% since the COVID-19 pandemic began, now constituting more than a quarter of the total base. Costco is leveraging artificial intelligence referrals to further engage this demographic, though analysts note that online sign-ups among younger members carry higher churn risks than in-store registrations.

Despite the sequential gains in renewal rates, valuation multiples have compressed, and analysts require more sustained follow-through before upgrading their outlook. Consequently, the analyst team maintains a hold-equivalent rating of 2 but lowered its price target from $1,100 to $1,050, citing the need for clearer evidence that membership trends are stabilizing against ongoing affordability headwinds.