Costco: Cramer's Big Shift Is a Valuation Call — the Data Undercuts His Comp Warning

Jim Cramer has defended Costco longer and louder than almost anyone on television. In January he said the company "runs like clockwork"; last September he called it "one of the best performers of all time". So when he put the stock in the "penalty box" on September 3, said "something's wrong," and began asking aloud whether Costco still belongs in his portfolio, it may be the loudest single signal yet that the market's long love affair with the shares has found a fault line.

The shift itself is real. Cramer and his analysts dropped Costco from their list of "top 10 stocks to buy right now," and he told viewers that a stock trading near 47 times trailing earnings is "the mistake," while the discount retailers he sees winning the trade-down trade just north of 17 times. His charitable trust, he clarified, remains long the shares — so this is a warning, not yet a sale.

The problem with the warning is that the headline number he hung it on does not match the company's own disclosures.

The comp "slide" isn't in the numbers

Cramer said Costco has posted "four straight quarters of declining comparable sales". That is not what the disclosed figures show. Comparable sales excluding gasoline and currency swings came in at about 7.1% in the fiscal first quarter, roughly 6.6% to 6.7% since, and 6.7% in the fourth quarter ended August 30 — essentially flat, and all still positive. Comparable sales for the full fiscal year rose 8.4% as reported (6.6% excluding gas and currency), with digitally-enabled comparable sales up more than 20% for the year.

What has genuinely softened is momentum at the margin, not the level. Analysts flagged that August traffic decelerated by about 1.1 percentage points, running below Costco's trailing 12-month average. And Cramer has a fair structural point: a company that has compounded mid-to-high single-digit comps for years is now doing so off a far larger base — "a victim of its own success", as he put it.

The real risk is the membership machine

Strip away the dramatic language and the shift does point at something real — but it is not comparable sales. It is the renewal rate, which matters enormously because membership fees produce a large share of operating income. The U.S./Canada renewal rate slipped 10 basis points in the fiscal first quarter to about 92% and has been roughly flat since, and the worldwide rate sits near 90%. Management attributes the softening to the mix of new sign-ups: a rising share of online registrations skew younger, and younger members have historically renewed at lower rates than the older, in-store members who anchor a warehouse's economics.

That is the crack beneath the "bulletproof business" story. The high-retention, older core is precisely the cohort that will eventually "age out" — Cramer's phrase, and a fair one — while the younger members replacing it churn faster. Membership fee income remains one of Costco's highest-margin lines (fee income jumped 14% year over year in the first quarter, a big reason earnings beat), so any erosion in the renewal base hits the profit engine directly even while comps look fine.

A great business at an unforgiving price

None of this changes the bull case's core fact: Costco is still one of the best-run retailers in the world, with a balance sheet in net cash, roughly $8.8 billion of trailing free cash flow, and free cash flow growth near 20%. The question was never whether Costco is a good business. It is whether the stock is a good price.

Even after falling about 15% from its May 2026 high, Costco still trades near 45 times trailing earnings and roughly 28 times EV/EBITDA. That is well above Walmart (about 38 times earnings and 19 times EV/EBITDA) and roughly double Five Below's earnings multiple. A 45-times multiple prices in flawless execution, stable renewal rates, and mid-to-high single-digit comps indefinitely. There is no room in that price for the membership deceleration to worsen — which is exactly what Cramer is gesturing at, however imprecisely he stated it.

The proof point to watch

The next test is close. Costco reports fourth-quarter fiscal 2026 results on September 24 — management's first real chance to answer whether the renewal slowdown is a blip or a trend, and whether comps hold into the new fiscal year.

For a retail investor, the useful takeaway is not to treat a TV personality's mood swing as a buy or sell signal in either direction. It is the split: the business is not in the "structural decline" that a 45-times multiple would make catastrophic, but the valuation is high enough that any slip in the membership engine — the thing the whole model runs on — will compress the multiple faster than the roughly 15% drawdown so far has absorbed. Costco remains a fine company; the stock has become an expectations trade. Until the September 24 print answers on membership retention, the honest position is to watch it rather than reach for it.