Costco Wholesale (COST) has fallen more than 18 percent from its May peak, and investors gambling on a swift rebound may be betting on a pattern that no longer holds.
Historically, Costco's stock has been a reliable bouncer. Over the past decade, the company experienced seven declines of 10 percent or more. In five of those seven cases, shares hit a new record high within 12 months. All seven eventually recovered, with the longest taking roughly 19 months.
The 2017 episode is instructive. After Amazon announced its acquisition of Whole Foods in June, at least one investment bank downgraded Costco over member-defection fears. The stock proved resilient, hitting a fresh record on Nov. 30, 2017, as membership growth held steady.
But the two most recent declines break that mold—and both started from bloated valuations.
In May 2022, Costco fell 31.5 percent from its April high after Target and Walmart blamed earnings misses on inflation. Recovery took until December 2023—a 19-month slog. Then, a decline that began in February 2025 persisted until May 2026, even as the broader market repeatedly hit fresh highs. The common thread: COST was trading at elevated multiples when each decline began.
The February 2025 entry point is the tell. Costco's trailing P/E reached 62.4—a 10-year high. EPS grew during 2025, but the multiple compressed faster than earnings expanded, choking the stock. When you're paying 62 times earnings, even solid fundamental performance doesn't guarantee upside.
The current headwind is real and quantifiable. Warehouse comp sales growth decelerated to 8.8 percent in June 2026 from 12.5 percent in May. The tailwind from elevated gas prices, which boosted traffic earlier this year, has faded.
For equity portfolios, the message is clear: don't assume this drawdown follows the historical script. Valuation multiple compression at elevated starting points is a different animal. Costco's earnings power remains intact, but shares may need to reset to lower multiples before the next leg up. Watch the next two quarters of comp-sales guidance closely—if deceleration continues, the stock could test lower levels before finding support.
