Costco & 3 Retail Stocks Set to Beat Wall Street This Earnings Season

Zacks expects retail-sector revenue growth of 8.6% this earnings season, while earnings growth slows to 1.6% from 6.5% previously, signaling margin pressure despite healthy sales momentum. The article highlights four stocks with positive Earnings ESPs and favorable Zacks ranks: CASY (+1.02% ESP, $3.44 EPS consensus, +30.8% y/y), LOW (+0.57%, $2.96 EPS, +1.4%), TGT (+2.35%, $1.34 EPS, +3.1%), and COST (+1.02%, $4.91 EPS, +14.7%). Overall tone is constructive for select retailers, with the strongest setup seen in Target’s and Costco’s earnings surprise potential.

Analysis

The cleanest read-through is that this is less a “retail recovery” call than a beta bifurcation call: the operators with pricing power, mix tailwinds, or subscription-like demand should keep printing, while traffic-dependent, discretionary-heavy formats remain vulnerable to any guide-downs. COST is the highest-quality hedge on consumer caution because its model monetizes trade-down without requiring robust unit growth, while CASY benefits from an underappreciated margin mix shift toward prepared food that is harder for peers to replicate quickly.

The second-order effect is on the rest of retail supply chains: stronger-than-expected results from these names would pressure weaker competitors to defend share with heavier promotions into the next 1-2 quarters, compressing gross margin across general merchandise and home-improvement adjacencies. That creates a relative short opportunity in lower-quality retailers and vendors exposed to inventory normalization, especially where working capital has already been stretched to preserve shelf availability.

The contrarian setup is that expectations are already leaning positive for the names with the strongest screens, so the upside is likely more about guide-quality than headline EPS. LOW and TGT are the most sensitive to any incremental evidence that consumers are trading down in baskets but not in total trips; if management commentary suggests unit pressure is offset only by promotional intensity, the market may rotate away from these names quickly despite beat potential. Over the next 30-90 days, the biggest catalyst is not the print itself but forward commentary on summer demand, shrink in promotion cadence, and tariff pass-through — any deterioration there would likely matter more than a small EPS miss or beat.

Key Decisions for Investors

• Long COST vs short a basket of lower-quality discretionary retailers for the next 2-6 weeks; COST should capture trade-down while peers absorb the promotional response. Favor a 1:1 notional pair, with downside limited to a post-print de-risking if membership commentary softens.
• Buy CASY into the print or on any modest post-earnings pullback; the risk/reward is strongest where mix can surprise. Use a 30-45 day horizon and treat any guide to stable prepared-food margin as a positive re-rating catalyst.
• Buy LOW only as a relative-value trade vs TGT, not as an outright high-conviction long. If professional demand commentary remains resilient, LOW should outperform on margin durability over the next quarter; if not, cut quickly because home-improvement elasticity can turn faster than headline revenue suggests.
• Short TGT on strength if the stock rallies into the print without clear evidence of durable gross-margin repair. The setup is asymmetric over 1-2 months: a beat with soft guidance likely fades, while a miss would expose the market’s patience with turnaround narratives.
• For event-driven traders, consider COST call spreads into the report rather than stock. The implied move is likely cheaper than the structural quality premium, and call spreads cap premium burn if management simply meets expectations rather than reaccelerating.