Costco dropped its latest earnings this week and the numbers were, depending on who you ask, either "perfectly fine" or "a screaming indictment of late-stage capitalism." The warehouse giant beat revenue expectations, missed slightly on earnings, and watched its stock do that thing where it shrugs and goes back to being expensive anyway.
Here's the part that makes normal people's heads spin: Costco trades at a price-to-earnings ratio somewhere north of 50.
For comparison, the S&P 500 average hovers around 25.
You are paying a premium for the privilege of owning a company that sells you 48 rolls of toilet paper and a rotisserie chicken for less than the cost of a sandwich.
The bulls will tell you this is justified because Costco has a membership model that prints money.
Renewal rates sit around 90% in the US and Canada.
That's basically a subscription service disguised as a grocery store, and Wall Street loves recurring revenue the way your uncle loves a good deal on a generator he'll never use.
But here's the uncomfortable truth nobody at the shareholder meeting wants to say out loud.
Costco's entire brand identity rests on a hot dog combo that has cost $1.50 since 1985.
That's not a business strategy, that's a hostage situation with extra mustard.
Every time inflation spikes, some analyst asks if the company will finally raise the price.
Every time, an executive says the hot dog is safe.
And every time, the stock ticks up a little because investors read that as "leadership stability" instead of "we are emotionally trapped by a tube of processed meat." Meanwhile, the actual shopping experience has become a contact sport.
Parking lots look like the opening scene of a disaster movie.
The checkout lines wrap around the frozen food section.
And somehow, people keep paying $65 a year just for the privilege of fighting a stranger over the last bag of Kirkland signature almonds.
The membership fee hike that kicked in recently didn't scare anyone off, which tells you everything about American consumer psychology.
We will complain about egg prices for six months and then happily hand over more money to buy eggs in bulk from a place that requires a membership card and a small loan for gas.
It's a bet on the idea that Americans will always show up for a bargain, even when the bargain comes with a parking lot brawl and a 40-minute wait.
The company reports solid numbers, the stock stays expensive, and somewhere a guy in a fleece vest is explaining to his wife why they need a 12-pack of mayonnaise.
Nobody is winning here except the shareholders, and honestly, they're not even sure they're winning either. **The Bottom Line:** Costco is a great store trapped inside a stock that behaves like a tech company with a cult following.
You can love the $1.50 hot dog and still admit that paying 50 times earnings for it is a little unhinged.
Final Thoughts
Buy the membership, skip the shares, and definitely don't ask me for financial advice because I'm currently eating a rotisserie chicken with my bare hands.