Costco's Underlying Sales Growth Has Slowed 3 Months in a Row. Its September Report Comes Oct. 7.

Costco's gas- and currency-adjusted comparable-sales growth slowed from 8.0% in May to 5.4% in August, or roughly 6% after adjusting for a Labor Day calendar shift. September sales, due Oct. 7, will be a key demand test: adjusted comps near 7% would indicate stabilization, while about 6% would confirm continued deceleration. Although fiscal 2026 EPS rose 14% to $20.76 and Q4 traffic accelerated to 3.3%, slower spending per trip and a still-rich 44x earnings multiple leave the stock viewed as expensive after its 16% decline from May's peak.

Analysis

The key issue is not whether Costco can maintain positive comps, but whether its incremental comp mix can sustain the earnings multiple. Rising visit frequency protects renewal and membership-fee economics, but weaker ticket growth limits merchandise-margin leverage and raises the probability that EPS growth reverts toward a high-single- to low-double-digit rate once prior fee-hike and non-recurring benefits roll off. At that growth rate, even modest multiple compression toward 35-38x would create material downside despite continued operational execution.

September is a near-term sentiment catalyst, but calendar effects make a single monthly print low-quality evidence. A strong adjusted comp number could support a relief rally over days, yet the more investable confirmation is whether fiscal 1Q traffic remains resilient while transaction growth reaccelerates without promotional intensity; otherwise, the market will increasingly view COST as a premium defensive compounder with decelerating organic momentum. Watch discretionary big-ticket categories and e-commerce mix, where weaker baskets can show up before headline comp deterioration.

Competitive read-through is mixed: Walmart (WMT) and Amazon (AMZN) are better positioned if consumers trade down or shift toward convenience, because both can monetize higher-frequency shopping through broader advertising, fulfillment, and third-party marketplace profit pools. Costco's membership model remains structurally durable, but its valuation leaves less room for a normalization in consumer spending than WMT's more diversified earnings base. The contrarian case is that higher traffic foreshadows share gains and eventual basket recovery; that thesis requires sustained traffic acceleration and adjusted comps above roughly 7%, not merely a calendar-assisted September beat.

Key Decisions for Investors

• Maintain a tactical underweight in COST into the Oct. 7 sales release; avoid chasing a post-print rally unless adjusted comps exceed 7% and management commentary supports transaction, rather than gasoline or calendar, as the driver. Thesis horizon: 1-3 months.
• Express relative valuation risk via long WMT / short COST in approximately beta-neutral sizing over the next 3-6 months. WMT offers greater downside insulation if consumption weakens; close the spread if COST demonstrates two consecutive months of adjusted comp reacceleration above 7% or WMT's U.S. comparable-sales trend deteriorates materially.
• For defined risk, consider COST put spreads dated beyond the fiscal 1Q earnings release rather than front-week options, where calendar noise can dominate. A 10-15% downside scenario is plausible if fiscal 1Q guidance implies low-single-digit comp growth and earnings growth loses its temporary supports; invalidate on durable high-single-digit adjusted comps plus stable operating-margin guidance.
• Do not use NFLX, NVDA, or GETY as read-through trades; their inclusion is promotional rather than economically connected to Costco's demand or valuation setup.