Costco Shares Plunge 1.33% Despite 13% Net Income Surge

Costco Wholesale (COST) shares fell 1.33% intraday, marking the third consecutive day of decline and reaching its lowest level since April 2025. The stock has dropped 2.22% over the past three days.

The strategy of purchasing Costco (COST) shares after they reached a recent low and holding for 1 week yielded moderate returns but underperformed the market. The annualized return was 8.76%, compared to the S&P 500's 13.82% over the same period. While the strategy showed volatility, it capitalized on Costco's consistent performance, but the low holding period limited its effectiveness during broader market rallies.

Costco reported a significant increase in net income for the third quarter of 2025, reaching $1.9 billion, which is an increase of more than 13% from the previous year. Additionally, net sales increased by 8% year-over-year. The company opened 9 new warehouses in the third quarter and plans to open 10 more in the fourth quarter, indicating ongoing expansion. E-commerce sales also saw a notable increase of 14.8%, and membership fee income grew by 10.4%.

Analysts have maintained positive ratings on Costco, with continued market share gains highlighted. Morgan Stanley raised their price objective, while UBS maintained a Buy rating, showing confidence in Costco's competitive position. The stock jumped 3% after Costco beat analyst forecasts for fiscal third quarter 2025 sales, indicating positive market reaction to its financial results.

Despite the positive financial performance and expansion efforts, Costco faced a $130 million LIFO charge in the quarter, negatively impacting gross margins. Foreign exchange rates also negatively impacted the translation of international net income to US dollars. These challenges, along with the recent decline in stock price, suggest that investors may be cautious about the company's near-term prospects.