Costco Is a Growth Stock. January Sales Prove It.

Some investors might automatically assume Costco (NASDAQ: COST) is an established, slow-growing company. They would be right on one count, but wrong on the other. It is certainly an established leader. But it's not slow-growing. In fact, the membership-based wholesale retailer's earnings per share grew by a high-teens percentage in its fiscal 2024, which ended Sept. 1. Further, sales in the months since then have accelerated compared to fiscal 2024, setting up the company for a great 2025.

Put simply, Costco is still a growth stock. This is important to understand because it helps justify its premium valuation.

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Accelerating sales growth

Helping fuel Costco's 17% year-over-year increase in earnings per share in fiscal 2024 was a 6% jump in comparable sales, adjusted to exclude the impacts of changes in gasoline prices and foreign currency exchange rates. Impressively, this was an acceleration from 5% adjusted comps growth in fiscal 2023.

Of course, it's not too surprising that Costco's growth accelerated in fiscal 2024. The company's sales are normalizing after coming off of extremely tough comparisons to the years of the COVID-19 pandemic. In fiscal 2021 and 2022, for instance, Costco's adjusted comparable sales rose 13% and 11%, respectively. As people's shopping habits normalized in the years following the pandemic, its growth rates naturally moderated. In fiscal 2024, however, Costco's growth rates moved upward again as the prior years of elevated growth levels faded further into the rear-view mirror.

But what's really surprising is how fiscal 2025 is shaping up for the retailer. Costco's adjusted comparable sales growth rates for its retail months of December and January (which are not precisely aligned with the calendar months), for instance, were significantly above fiscal 2024 levels -- at 9.9% and 9.8%, respectively. Even more, a further adjustment to account for the fact that Costco's December results were positively impacted by a 15% boost due to the timing of Thanksgiving, Black Friday, and Cyber Monday compared to the year-ago December shows that the company's momentum is actually accelerating.

Powerful catalysts

Strengthening the bull case even more, there's good reason to believe that Costco's high growth rates are sustainable for the foreseeable future. This is due to the company's ongoing international expansion and its e-commerce rollout.

The strength of these two parts of Costco's business is highlighted by their outsized growth rates relative to the overall business. For example, the membership-based retailer's adjusted comparable sales in Canada and the company's "other international" segments both rose by about 8% in fiscal 2024, approximately 2 percentage points faster than the company's total growth rate. In addition, Costco's adjusted comparable sales coming from e-commerce sources soared by 16%.

Unsurprisingly, strength in these segments has persisted into 2025. The company reported January adjusted comparable sales growth rates for Canada, other international, and e-commerce of 12.3%, 10%, and 15.2%, respectively.

With 617 of its 897 warehouse stores in the U.S. and 767 in North America, the company has significant room for international expansion. Further, the company is arguably under-penetrated in e-commerce channels, so its efforts to streamline this part of its business will help it capitalize on plenty of low-hanging fruit.

Combining Costco's accelerating growth and its powerful catalysts with the magic of the company's overall business, including its extremely low prices, 90% renewal rate on memberships, and its ability to increase its annual membership prices over time, it's easy to see why the stock trades at a premium valuation of more than 61 times earnings.

Costco is a growth stock with powerful and sustainable catalysts, and it should trade like one.

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Daniel Sparks and his clients have positions in Costco Wholesale. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.