Cramer says he is avoiding Costco stock
Costco Wholesale is facing scrutiny from television personality and investor Jim Cramer, who stated that something is wrong at the retailer and intends to investigate the issue. The commentary follows Costco’s release of slightly better-than-expected sales figures for August, a report that did little to alleviate concerns regarding the company’s valuation and its ability to attract younger customers. Cramer noted that the stock’s lofty price-to-earnings ratio, which stands at nearly 41 times forward earnings estimates, requires flawless execution to maintain, and he believes the latest sales data suggests execution is currently falling short.
Sales figures show a narrow beat
For the four weeks ending Aug. 30, Costco reported a 5.4% increase in same-store sales, or “comps,” excluding the impact of gasoline prices and foreign exchange fluctuations. The company attributed a 75 basis point drag on growth to the fact that Labor Day fell a week later in the calendar this year. Adjusting for this calendar headwind, analysts at Wells Fargo projected same-store sales would have increased 6.2% last month, versus an expectation of 6.1%. Despite this narrow beat, the data also revealed that foot traffic decelerated by 110 basis points, or 1.1 percentage points, and tracked below the trailing 12-month average.
Costco shares were flat on Thursday at $929 each, representing a 15% decline from the stock’s all-time high of nearly $1,097 in May. While the price is still roughly 8% higher than where it began the year, the trajectory has been downward since the start of 2026. The shares have struggled to hold new highs throughout the year, mirroring the volatility seen in 2025. This underperformance stems from a core issue: decelerating membership growth. The difficulty lies in converting online signups—often from younger demographics—into renewals at the same rate as in-store signups, which skew older.
Membership fees are the business engine
Costco generates a significant portion of its operating income from membership fees, a revenue stream that provides stability in a retail sector grappling with consumer inflation and cost pressures. Cramer expressed concern that the company is not resonating with its younger members. Jim Cramer said, “You’re not getting the younger people to re-up,” and “You don’t want to age out. If Costco ages out, that would be terrible.” The reliance on this consistent fee income makes the stagnation in membership renewal rates a critical risk factor for the business model.
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The financial pressure from inflation has forced consumers to scrutinize every dollar, yet the pricing power of wholesale goods has kept Costco afloat. Jim Cramer suggested he must consider whether the stock still belongs in his portfolio, despite it being a longtime holding. “I’m not just going to sit here and just say, ‘Let’s take a beating’ — that’s never been my style,” he said. The stock has been posting mid-to-high single-digit comp sales growth consistently for years, which can lead investors to view the company as a victim of its own success, making it difficult for management to sustain a higher percentage growth rate.
Future prospects
The August monthly sales report closes the books on Costco’s fiscal year 2026. When earnings are released later this month, the revenue side of the ledger is unlikely to be a surprise. The focus will shift to the fiscal 2026 fourth quarter numbers, which should provide a clearer picture of how management plans to address the membership problem. As Jim Cramer looks for answers, the market will be watching to see if the retailer can reverse the trend of decelerating traffic and find a way to capture the younger demographic that is essential for long-term growth.
Costco’s ability to adapt to changing consumer behaviors will be key in the coming months. They need to find ways to attract and retain younger members, which is vital for the company’s long-term success. The company’s pricing power and membership fees have helped it work through the challenges posed by inflation, but they must continue to evolve to remain competitive.
The market is waiting to see how Costco will address the issues raised by Jim Cramer. They will be closely watching the company’s earnings report and looking for signs of improvement in membership growth and sales. The company’s ability to execute its plans and deliver results will be critical in determining its future prospects.
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Jim Cramer’s comments have highlighted the challenges facing Costco, and they will be closely watched in the coming months. The company’s stock price has been affected by the concerns raised by Jim Cramer, and it remains to be seen how they will respond to these challenges. One thing is certain, however: Costco must find a way to attract and retain younger members if it is to achieve long-term growth.
The situation at Costco is complex, and there are no easy solutions. They must balance the need to attract younger members with the need to maintain their current customer base. The company’s pricing power and membership fees are key to its success, but they must also be careful not to alienate their existing customers.
As the market waits to see how Costco will respond to the challenges raised by Jim Cramer, one thing is clear: the company must take action to address the issues facing it. They must find a way to attract and retain younger members, and they must do so without alienating their existing customer base. The coming months will be critical in determining the future prospects of Costco.
