Costco Shares Surge 19% Since September, Driven by Record Gas Savings

Costco shares have climbed more than 19% since bottoming out in mid-September. This sharp recovery has moved the stock closer to its record high of $1,094 set in May. The warehouse retailer was one of only three Club names to post gains in Thursday's volatile market, rising nearly 2% to join defensive peers Cardinal Health and Kimberly-Clark.

The rally has been fueled by a rotation away from artificial intelligence stocks and toward safer holdings. However, company fundamentals have provided the necessary support for the price increase. October financial results show net sales of $24.5 billion, a 12.6% increase from the prior year. Comparable sales rose 11.1%, while figures excluding gas and currency fluctuations grew 7.3%, a performance Goldman Sachs analysts described as better than expected.

Management attributes the recent strength to a strategic focus on volume rather than price. Jim Cramer, who discussed the stock on CNBC, stated, "Costco is a volume store. It's not a price store." He added, "I continue to think that Costco represents great value." This approach relies on competitive pricing to drive customer traffic, which in turn generates substantial revenue from membership fees.

The gasoline business has become a critical driver of store traffic. Fuel prices have risen due to higher oil costs linked to the Iran war. During the September earnings call, CEO Ron Vachris noted that gas had a record year. "During the fiscal year, we estimate we saved our members over $3.2 billion versus the average price at the pump in markets where we operate," Vachris said.

The company also expanded 26 existing U.S. gas stations at its highest-volume locations. These expansions aim to increase throughput and improve the member experience. Although gas is not highly profitable on its own, it serves as a magnet for shoppers who are likely to purchase other goods while refueling.

Investors have responded positively to signs that membership renewal rates are stabilizing. The stock began its steady ascent on Sept. 16, but momentum accelerated after the company reported solid fiscal 2026 fourth-quarter earnings. That report showed sequential improvement in worldwide renewal rates, addressing earlier concerns about slowing membership growth and wobbly renewal trends.

The valuation remains a point of discussion. The stock trades at nearly 47 times fiscal 2027 earnings estimates. Jim Cramer cited the late Charlie Munger, a former Costco board member and longtime Warren Buffett associate, who believed the business model justified the premium multiple. "Munger said this is the only stock in his whole lexicon that he felt you have to not pay that much attention to the P/E," Cramer said. "I've adopted that for a long time."

Cramer's Charitable Trust holds a long position in Costco stock. While the company has generated strong cash flow, the high valuation leaves little room for operational errors. Investors are watching closely to see if the company can maintain the near-perfect performance required to sustain its market position and stock price near historical highs.