Jim Cramer Says Costco (COST) “Stock’s Acting Poorly”

On September 18, CNBC host Jim Cramer criticized Costco Wholesale Corporation's (COST) stock, stating that it was "acting poorly" during his Mad Money show. He mentioned that the retail giant has been struggling to attract younger customers to renew their memberships, as younger individuals tend to shop online rather than in physical stores.

Cramer noted that Costco's distinctive in-store experience, including its extensive product samples, sets it apart from other retailers. The company reported a 9.9% increase in net sales for August, with preliminary earnings for the fourth quarter projected to reach $94 billion, a 11.3% increase compared to the same period last year.

Costco's membership base stands at 82.9 million, with a 92.2% renewal rate. Despite these strong figures, the stock's valuation remains high, with a P/E ratio exceeding 45x. Cramer cautioned that a decline in customer traffic, rising labor costs, or slower membership growth could negatively impact the stock's multiple. The insider database reveals that 104 hedge funds held Costco stock as of the second quarter, a slight decrease from the previous quarter.

Short interest in Costco is currently at 1.71% of the public float, indicating a lack of aggressive bearish sentiment. Cramer advised that while Costco is a strong company, caution should be exercised due to its elevated valuation and limited room for error.