Can Costco Stock Build a Meaningful Retail Media Business?

Costco Wholesale Corporation COST is expanding its retail media capabilities to build an incremental digital revenue opportunity while strengthening member engagement. A major step in this strategy is the recently launched collaboration with Google Commerce Media and YouTube. This partnership serves as a significant milestone on the warehouse giant's journey toward expanding its share of retail media revenues. It also simplifies how brands and agencies collaborate with Costco's retail media network. The opportunity is supported by accelerating digital engagement, with digitally enabled comparable sales rising 21.5%, and site and app traffic increasing 37% during the third quarter of fiscal 2026.Management emphasized that the company's business model differs from other players due to its high SKU efficiency. However, Costco approaches this opportunity with a strict philosophy where the member always comes first. The primary focus of their retail media expansion is building personalization capabilities to deliver relevant messaging that helps members save both time and money. At the same time, Costco has introduced media activity on third-party sites.We note that personalized product recommendation carousels generated conversion rates three times higher than typical levels and contributed just under $0.5 billion in e-commerce sales during the quarter.Management expects retail media revenues to ramp up meaningfully. Brand partners participate to secure a better return on their marketing spend while providing relevant experiences. Costco maintains a strict structural guardrail for this digital revenue stream. Between 80% and 90% of the value generated from retail media is directly reinvested into the membership base through better pricing and greater value, reinforcing Costco's member-first strategy while supporting long-term retail media expansion.What the Latest Metrics Say About CostcoCostco, which competes with Dollar General Corporation DG and Target Corporation TGT, has seen its shares drop 6.1% over the past three months compared with the industry’s 2.9% decline. While shares of Dollar General have fallen 2.6%, those of Target have jumped 8.9% in the aforementioned period. Image Source: Zacks Investment ResearchFrom a valuation standpoint, Costco's forward 12-month price-to-earnings ratio stands at 43, higher than the industry’s ratio of 30.6. However, the stock is trading below its 12-month median level of 46.35, indicating some moderation in valuation despite sustained investor confidence in the stock.Costco is trading at a premium to Target (with a forward 12-month P/E ratio of 15.18) and Dollar General (15.46).  Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for Costco’s current financial-year sales and earnings per share implies year-over-year growth of 9.5% and 13.3%, respectively. For the next fiscal year, the consensus estimate indicates a 7.9% rise in sales and 10.2% growth in earnings.The consensus estimates for earnings per share for the current and next fiscal year have increased by 6 cents to $20.38 and 10 cents to $22.46, respectively, over the past 60 days. Image Source: Zacks Investment ResearchCostco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.Free: See Our Top Stock And 4 Runners UpThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks