The Risk Factors to Watch Out For in Costco Wholesale Stock

Costco Wholesale (COST) is facing threats. Even the biggest names aren’t invincible. Stocks can drop sharply without warning – wiping out months or years of gains in a matter of weeks. History shows that sudden market swings can hit any company, no matter how dominant it seems.

Specifically, we see these risks:

1. Decelerating U.S. Comparable Sales Growth
2. Membership Renewal Rate Fatigue
3. Geopolitical Tariff and Sourcing Pressures

Risk 1: Decelerating U.S. Comparable Sales Growth

• Details: Failure to meet lofty Street growth expectations, Valuation de-rating from ~48x P/E to historical norms,
• Segment Affected: U.S. Operations
• Potential Timeline: Immediate (Next 1-2 Quarters)
• Evidence: U.S. adjusted comparable sales growth slowing sequentially (Q1 2026 vs. FY 2025)., Management commentary citing ‘bumpiness’ in monthly sales.,

Risk 2: Membership Renewal Rate Fatigue

• Details: Slowing growth in high-margin membership fee income, Increased SG&A from higher marketing spend to attract and retain members,
• Segment Affected: Membership Revenue (Global)
• Potential Timeline: Next 2-3 Quarters
• Evidence: Worldwide membership renewal rates dipped 10 basis points to 89.7%., Management attributes dip to lower renewal rates from younger, digitally-acquired members.,

Risk 3: Geopolitical Tariff and Sourcing Pressures

• Details: Gross margin compression from increased import costs, Erosion of price leadership if costs are passed to consumers,
• Segment Affected: Import-heavy Merchandise Categories (e.g., Non-Foods, Apparel)
• Potential Timeline: Ongoing (FY 2026)
• Evidence: Active lawsuit against U.S. government over tariff refunds indicates material financial impact., Company actively shifting sourcing to U.S.-made goods to mitigate tariff volatility.,

What Is The Worst That Could Happen?

Looking at Costco’s risk in tough times helps set realistic expectations. It fell about 49% during the Dot-Com crash and nearly 48% in the Global Financial Crisis. The inflation shock brought a 31% dip, while the 2018 correction and Covid pandemic caused smaller drops around 22% and 14%, respectively.

But the Stocks fall even when markets are good – think events like earnings, business updates, and outlook changes. Read COST Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

Is Risk Showing Up In Financials Yet?

• Revenue Growth: 8.3% LTM and 6.7% last 3-year average.
• Cash Generation: Nearly 3.2% free cash flow margin and 3.8% operating margin LTM.
• Valuation: Costco Wholesale stock trades at a P/E multiple of 48.9

*LTM: Last Twelve Months

If you want more details, read Buy or Sell COST Stock.

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