Costco Wholesale (COST) stock cooled last week despite strong July sales, which showed an impressive 8.5% year-over-year gain in net sales. The pullback wasn’t unique to Costco—Walmart (WMT) and BJ’s Wholesale (BJ) also underperformed the broader S&P 500 (SPX), which advanced about 1%. Retail sector weakness appears tied to fresh macro data: inflation ticked higher, with “food at home” costs up 2.2% over the past year, while consumer sentiment continued to slide.
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For Costco, inflation is a double-edged sword. On one hand, persistent cost pressures threaten margins; on the other, they bolster the company’s value proposition for cost-conscious shoppers. This push and pull between macro headwinds and operational strength leaves me cautiously Bullish on COST as it approaches its next earnings report in late September. In other words, what typical investors may classify as “headwind” may actually become a boon for Costco, thereby turning a perceived negative into a so-called favorable “tailwind.”
The Double-Edged Sword of Inflation
The U.S. Bureau of Labor Statistics reported the July 2025 Consumer Price Index (CPI) last week, showing a 0.2% monthly increase in overall prices. Food was a key driver, rising 2.2% both at home and away. For retailers like Costco, where profits are measured in pennies on the dollar, even modest food inflation can translate into meaningful margin pressure.
Costco’s saving grace lies in its business model—profitability is anchored less in retail margins and more in annual membership fees, giving it a buffer against inflationary pressures. Still, like most businesses in today’s climate, Costco faces a delicate choice: absorb higher costs or pass them on to consumers. Push prices too aggressively, and it risks undermining its core value proposition as a low-price leader. Another strategic advantage is its private-label Kirkland Signature brand, which provides greater control over both supply chains and pricing power.
Macro Fears Bolster Costco’s Value Proposition
One could argue that inflation actually enhances Costco’s appeal. As grocery bills climb, the value of a Costco membership becomes easier for consumers to justify. Inflationary periods also encourage shoppers to stock up on non-perishables to lock in today’s prices—a behavior perfectly suited to Costco’s bulk-sales model.
On top of that, Costco’s gas stations provide members with savings that become increasingly attractive as fuel prices rise. Together, these factors feed into Costco’s flywheel effect, drawing in new members while boosting visit frequency among existing ones.
Waning Consumer Confidence Becomes Both Risk and Catalyst
A recent University of Michigan survey showed consumer confidence slipping further, down 5% month-over-month and 13.7% year-over-year. Yet, while sentiment weakens, spending on essentials remains unavoidable; consumers simply adjust where and how they shop. This dynamic could play in Costco’s favor, as its membership fee can be reframed as an investment: “Pay once, and save all year on the necessities.” In fact, the company’s member renewal rate is trending higher despite a downtick in the first half of 2025, according to TipRanks data.
The risk, however, is twofold. While low confidence may drive traffic for staples, it could dampen demand for Costco’s higher-margin, discretionary categories such as electronics and seasonal goods.
News & Media Coverage
A recent headline surrounding Costco is its decision not to dispense the abortion pill Mifepristone in its U.S. pharmacies. Given Costco’s politically diverse membership base, taking a firm stance on such a divisive issue carries substantial risk with limited upside. Instead, the company framed its move as a business decision, citing “lack of member demand” as the rationale.
Even so, the choice drew criticism from Senate Democrat Patty Murray, who accused Costco of yielding to “anti-abortion fanatics,” while religious groups had previously pressured the retailer not to carry the drug. In the end, while it’s impossible to satisfy all sides, Costco seems to have navigated the issue without sparking a full-blown controversy.
Is COST Stock a Good Buy Now?
On Wall Street, COST carries a Moderate Buy consensus rating based on 15 Buy, nine Hold, and zero Sell ratings in the past three months. COST’s average stock price target of $1,110.39 implies an upside potential of 13% over the next 12 months.
Why Costco Stock Could Weather Fed Jitters and Political Noise
Recent economic data presents a mixed picture for Costco. At the same time, the Mifepristone episode highlights how the company can be pulled into controversy unexpectedly. By framing its decision as a matter of business rather than ethics, Costco likely chose the path of least resistance—a pragmatic move that helps limit reputational and political risk. For investors, that’s a positive, as the stock already faces enough uncertainties tied to competition and earnings performance.
Looking ahead, the Jackson Hole Economic Symposium later this week will be closely watched. Remarks from Federal Reserve Chair Jerome Powell and other central bankers could set the tone for interest rate expectations. A “hawkish” message may unsettle markets and reignite concerns over slowing consumer spending.
As for Costco, I remain cautiously Bullish heading into its September earnings report. That said, investors should brace for volatility in the near term as markets digest a flood of macroeconomic signals.