RBC Capital Markets has described Costco Wholesale as 'one of retail's best structural stories', highlighting the company's ability to sustain membership growth and footfall even as broader consumer spending softens. In a note published this week, RBC reiterated its 'sector perform' rating on the stock, with a price target of $875.
Despite the glowing assessment of the business model, RBC flagged that the shares are trading at roughly 50 times forward earnings — a level that leaves little margin for error. 'Costco’s execution is excellent, but the current multiple prices in near-perfect outcomes,' the analysts wrote, warning that any disappointment on sales or margins could trigger a sharp correction.
The commentary comes as UK investors increasingly look to US-listed retailers for exposure to resilient consumer demand. Costco's warehouse model, which relies on membership fees rather than product markups, has proved particularly durable during periods of inflation, as shoppers seek value in bulk purchases.
For UK pension funds and retail investors holding US equities through index trackers, Costco remains a significant component of consumer staples and retail ETFs. The company's strong same-store sales growth and renewal rates above 90% underpin its defensive appeal, but the high valuation means it is more sensitive to interest rate expectations and economic data than cheaper rivals.
RBC's note also pointed to Costco's e-commerce expansion and international growth, including its UK presence, as long-term drivers. However, with the stock already pricing in much of that optimism, the bank advises caution on new entry points for now.