Costco Q3 Earnings Preview: Will the Numbers Reassure Markets on Retail Sentiment?

Costco (NASDAQ:) has been surviving the market turmoil so far and has the benefit of being a discount retailer. The company’s key strength is the customer-focused approach and promoting a membership model. The company’s digital transformation has been particularly successful, with e-commerce sales surging 20.9%, complemented by expanding partnerships such as Uber (NYSE:) delivery services across 17 states and Canada.

Key Highlights:

• Costco’s digital initiatives, such as enhancing its e-commerce platform and forming partnerships like with Uber, are strategic moves to boost its presence in the expanding online retail market. These efforts aim to increase customer convenience by providing seamless online shopping options and quick delivery services.
• The company’s focus on retail media and personalization strategies has the potential to generate new revenue streams while enhancing customer engagement. Retail media allows the company to monetize its platform by offering targeted advertising opportunities to brands, creating an additional income source.
• COST is trading at approximately 54 times its projected 12-month earnings per share, are notably high and at a multi-decade peak. This elevated valuation suggests the market has high expectations for the company’s future growth, but it also leaves a limited margin for missteps or setbacks.
• Recent operational changes, such as scanning membership cards upon entry and new packaging for certain products, could introduce sales friction and a negative impact on customer satisfaction.

COST Q3 earnings after market Thursday May 29, 2025

Option Statistics

Put/Call ratio suggests the following three scenarios:

• With Put/Call ratio between 1.6513 to 0.801 for the next four upcoming expiries, suggest that the overall option traders are long Put.
• Lower earnings and guidance could trigger a sharp sell-off.
• Better-than-expected earnings and guidance would trigger a gradual rise.
• Option market is showing a large net positive Gamma at 1040 strike versus net negative gamma exposure at 900 strike over the spectrum of May 2025 to December 2027.

Technical Analysis Perspective

• COST is trading inside a descending triangle formation on weekly charts.
• A declining trendline from Feb ’25 is containing the rallies between 1040-1020 region.
• A horizontal support is sitting between 885-865 region.
• Cost is heading lower to 885 over a period of time, which is valid as long as 1040 obstacle remains intact post earnings.

Weekly Candlestick Chart

COST Seasonality Chart:

• COST closes 0.8 % higher in May, 70% of the time since 2006.

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Ali Merchant is a seasoned financial market professional with expertise in Technical Analysis, Treasury & Capital Markets, Trading, Sales, Research, Training, Fund & Relationship Management, Fintech, and Digitalization. He is a CMT charter holder and an active member of CMT Association, USA, American Association of Professional Technical Analysts, and CMT Association of Canada. He has worked on various roles and organizations in North America and the GCC, such as ABN Amro bank, Thomson Reuters, Refinitiv, MAK Allen & Day Capital Partners, and Bridge Information Systems.

He is the founder of TwT Learnings, provides financial market training.