What’s more resilient during tough economic times than a grocery store? So, it’s not surprising when analysts remain bullish on Costco Wholesale Corporation (NASDAQ: COST) stock, despite the company’s mixed quarterly results.
For Costco (NASDAQ:COST) shareholders, the good news was that revenue beat estimates for the long-standing grocery warehouse chain; unfortunately, earnings fell short of market expectations.
Despite the mixed results, private investor and U.S.-based analyst Keith Fitz-Gerald, continues to see opportunity in the Costco brand.
In an interview with CNBC, Fitz-Gerald stated: “I think we’re going to see a good jump in comparable sales, and I think we’re going to see a very resilient membership, particularly now when people’s wallets are stretched and fear is running high.” Costco’s robust business model, characterized by a membership-based revenue stream and a focus on essential goods, positions it as a defensive stock in uncertain times — and a stock Fitz-Gerald, “cannot imagine not owning.”
- Learn How: To grow your net worth using stocks. Check out the CIBC Investor’s Edge powerful research tools to discover investing strategies and to stay on top of the markets with real-time news and stock alerts.
Costco’s resilience in economic downturns
One big reason why analysts favour Costco (NASDAQ:COST) stock is because of the brand’s “membership lock-in,” explained analysts at Bernstein, a U.S.-based private wealth management firm in a recent interview. They noted that its membership-based model and emphasis on consumer staples enable it to capture market share when macroeconomic conditions worsen. They state that Costco is among the top companies poised to endure economic challenges due to these factors.
The analysts at global wealth manager UBS echoed these sentiments, highlighting Costco’s ability to navigate uncertain macroeconomic backdrops better than many retailers. They attribute this to Costco’s flexibility in product offerings and the high-margin revenue from membership fees, which provide a buffer against economic headwinds.
Costco’s membership model offers a stable revenue return
One reason for the bullish outlook for Costco stock is the firm’s membership model. Costco’s membership fees are a significant contributor to its profitability. In fiscal year 2024, membership fees accounted for over 65% of the company’s net operating income.
This recurring revenue stream offers stability, especially during economic downturns when consumers seek value.
The company’s high membership renewal rates further underscore customer loyalty. As of the first quarter of fiscal 2025, the renewal rate in the U.S. and Canada stood at 93%, with a worldwide rate of 90.5%.
Costco’s stock performance amid market volatility
Costco’s stock has demonstrated resilience during market downturns. For instance, during the COVID-19 pandemic in 2020, while the S&P 500 experienced a significant decline, Costco’s stock recovered swiftly, reflecting investor confidence in its business model.
As of May 27, 2025, Costco stock was trading around US$1,013, reflecting a year-to-date increase of approximately 10%. (For Canadian investors not interested in U.S.-traded stock, the TSX-traded Costco stock (COST.TO) was trading around C$46.30.
- Start Trading with $0 Commissions: Using the award-winning Questrade platform. Build your own investment portfolio with a self-directed account.
Strategic flexibility and operational efficiency
Costco’s operational model allows it to adapt quickly to changing economic conditions. The company’s Chief Executive Officer (CEO) Ron Vachris, emphasizes the company’s ability to manage challenges, stating that their "treasure hunt" strategy and strong supplier relationships help maintain low prices despite potential tariffs and supply chain disruptions.
Bottom line
Costco’s consistent performance, strong membership model, and strategic flexibility make it a compelling option for investors seeking stability during economic uncertainties.
Sources
1. Investopedia: These 3 Retailers Could Be Best Positioned To Weather ‘Macro Storm,’ Bernstein Says (March 25, 2025)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
Related Posts
