Costco Stock Rallies on December Sales: Buy, Hold or Take Profits?

Costco Wholesale Corporation COST stock has extended its recent rally after the retailer reported strong December sales. As a dominant player in the warehouse club space, Costco continues to benefit from a resilient membership-driven model, steady traffic trends and improving digital demand. The upbeat sales have drawn investor attention to a key question: Should shareholders buy more, hold tight or start booking profits at current levels?

Costco shares have advanced 9.2% since the company reported its December sales results on Jan. 7. Over the past month, the stock has risen 13.3%, outpacing the industry's gain of 9.6%. The December report showed solid comparable sales growth across regions and a sharp acceleration in e-commerce, strengthening the narrative that Costco’s operational execution and customer loyalty remain intact despite a challenging retail backdrop.

When compared with its peers, Costco has underperformed Target Corporation TGT but fared better than Ross Stores, Inc. ROST and Dollar General Corporation DG. While shares of Target have risen 16.8%, those of Dollar General and Ross Stores have jumped 8.1% and 6.4%, respectively. 
 

Decoding Costco’s December Sales Report

Costco’s membership-driven model remains a core strength, with high renewal rates ensuring a dependable revenue stream. Its efficient supply chain and bulk purchasing power enable competitive pricing, reinforcing its strong market position. This combination of customer loyalty and operational efficiency continues to give Costco an advantage in a competitive retail landscape.

For the five weeks ended Jan. 4, 2026, Costco reported a 7% year-over-year increase in total comparable sales. Regionally, comparable sales rose 6% in the United States, 8.4% in Canada and 10.6% in Other International markets. Digitally enabled comparable sales in December surged 18.9%. (Read: Costco's December Sales Stay Strong: What Is Driving COST's Momentum?)

As a result, Costco's net sales for December rose 8.5% to $29.86 billion, up from $27.52 billion in the same period last year. This follows a sales improvement of 8.1% and 8.6% in November and October, respectively, reflecting a strong and consistent sales performance over the past few months.

A Sneak Peek Into Costco’s Tailwinds

Costco’s main strength is its resilient membership-based business model, which acts as a powerful growth engine. This setup provides a steady and predictable revenue stream from annual fees, setting Costco apart from traditional retailers. Importantly, the model creates a strong value proposition, leading to consistently high membership renewal rates. This approach supports Costco’s competitive advantage, enabling it to operate on slim margins while achieving high sales volumes.

The company’s operational discipline is clear in its meticulous approach to supply-chain management and procurement. By leveraging scale and efficiency, Costco routinely secures favorable terms with suppliers and passes savings on to customers. This disciplined cost management improves margins and shields the company from inflationary pressures. 

Costco’s capacity to adapt to changing consumer preferences has also been key to its growth. The company modifies its product mix to include both everyday essentials and unique, high-demand items — a strategy that broadens its appeal across diverse customer groups. Using data-driven market analysis and flexible merchandising, Costco has gradually expanded its presence both domestically and internationally.

Costco’s strategic investments in technology and logistics are strengthening its multi-channel ecosystem. The company’s digital initiatives have improved member engagement and operational efficiency, combining online convenience with the effectiveness of its warehouse model. The company’s same-day delivery offering is powered by Instacart, Uber Eats and DoorDash. By boosting e-commerce capabilities and expanding logistics infrastructure, Costco not only taps into new growth opportunities but also ensures stable demand from a wide member base that values reliability and convenience equally.

How Consensus Estimates Stack Up for Costco

The Zacks Consensus Estimate for Costco’s current financial-year sales and earnings per share implies year-over-year growth of 7.6% and 11.7%, respectively. 
 

Does Costco’s Valuation Reflect Strength or Stretch?

Costco is trading at a premium to its industry peers. The company's forward 12-month price-to-earnings ratio stands at 46.31, higher than the industry’s ratio of 31.94 and the S&P 500's ratio of 23.21. However, the stock is trading below its median P/E level of 49, observed over the past year. 

Costco is trading at a premium to Target (with a forward 12-month P/E ratio of 14.43), Dollar General (21.10) and Ross Stores (27.04). 
 

Now, the question arises whether Costco’s current price is warranted or overvalued in today’s market.

The company’s high valuation shows that investors have strong faith in the company’s steady growth, loyal customer base and solid business model. This premium may be deserved, given Costco’s consistent performance, but it also means the stock has less room for error. At this level, some of the future growth may already be priced in, making it harder to justify further upside.

How to Play Costco: Buy, Hold or Sell?

Costco's December sales results reaffirm its position as a dependable stock in the retail sector, backed by strong membership growth, consistent comparable sales improvement and solid financial fundamentals. While the stock trades at a premium valuation, this appears justified, given its operational resilience, expanding global footprint and loyal customer base. For long-term investors willing to pay up for quality and stability, Costco remains a compelling choice. However, for value-conscious buyers, the elevated valuation may warrant patience for a more attractive entry point. Costco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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