Have you ever watched a stock you admire stumble a bit, only to wonder if it’s the perfect moment to jump in? That’s exactly the feeling swirling around one of America’s favorite retailers right now as we kick off 2026.
After a tough 2025 where shares lagged the broader market by a wide margin, some Wall Street voices are stepping up with a clear message: this dip looks overblown, and the long-term story remains incredibly compelling.
In my view, these kinds of moments separate patient investors from the crowd. Let’s dive deeper into why this wholesale giant might be setting up for a strong comeback.
A Rare Pullback for a Consistent Performer
It’s not often that we see this retail powerhouse underperform so noticeably. While the broader indexes soared with double-digit gains last year, its shares actually slid backward. A roughly 6% decline might not sound dramatic on paper, but against a roaring market, it certainly caught attention.
Yet history shows these episodes aren’t entirely new. Think back to periods when rapid expansion temporarily disrupted key metrics. The pattern often goes like this: explosive growth in store traffic leads to a natural slowdown in certain areas, investors get nervous, shares correct—and then the underlying strength reasserts itself.
Perhaps the most interesting aspect is how resilient the core business model has proven through similar phases. Time and again, it bounces back stronger.
What the Recent Upgrade Really Signals
One prominent firm just made a bold move, shifting their rating to outperform and slapping on a price objective that implies meaningful upside from current levels—around 17% higher, to be precise.
They didn’t stop there. The stock earned a spot on their coveted top picks list for the year ahead. That’s the kind of endorsement that tends to turn heads, especially when backed by detailed research.
I’ve found that analyst upgrades like this often carry extra weight when the underlying concerns feel more cyclical than structural. And that’s precisely the argument being made here.
Shares have corrected on concerns that both membership and comp sales growth are slowing as part of some underlying change within the model.
Analyst note
The pushback? Those worries might be missing the forest for the trees.
Unpacking the Membership Growth Story
Membership fees are the lifeblood of this business—recurring, high-margin revenue that funds everything else. So when growth in new sign-ups appears to decelerate, alarms naturally go off.
But dig a little deeper, and a different picture emerges. Recent U.S. warehouse openings include a significant portion of “fill-in” locations—new stores placed near existing high-volume ones. It’s smart long-term strategy, yet it temporarily pulls some demand away from mature sites.
Think about it: a shiny new warehouse opens just a few miles away. Some loyal shoppers switch over, spreading the traffic thinner in the short run. That can make overall membership additions look softer than they truly are.
- Roughly half of recent domestic openings qualify as these fill-ins
- This dynamic creates a temporary drag on reported growth
- Once the dust settles, the broader base strengthens
In my experience, these are exactly the kinds of growing pains that separate exceptional compounders from ordinary retailers.
The Premium Member Surge Nobody’s Talking About
Here’s where things get really intriguing. While total membership growth grabs headlines, the composition tells a richer story.
Premium tier additions—those higher-fee executive memberships—are reportedly accelerating. Recent quarters showed these sign-ups running two to three times faster than overall growth.
Why does this matter so much? Simple: it signals trade-up behavior among existing customers. People aren’t just joining—they’re willingly paying more for extra perks. That speaks volumes about perceived value.
Add in domestic renewal rates hovering above 90%—consistently better than historical averages—and you start seeing real moat characteristics shine through.
Domestic renewal rates remain exceptionally high at greater than 90% and above the 10-year running average.
Those numbers aren’t accidents. They reflect decades of building trust and delivering outsized value.
Too Much Demand: The Best Kind of Problem
Let’s pause for a moment and appreciate the irony. The primary investor concerns all trace back to having, well, too many eager customers.
Store volumes running hot. Rapid unit expansion to meet demand. Some cannibalization as new locations open. These aren’t signs of weakness—they’re symptoms of overwhelming popularity.
Compare that to retailers struggling with empty aisles and desperate promotions. Suddenly, the current worries feel almost enviable.
Of course, near-term optics matter in public markets. Sentiment can swing sharply. But patient capital often gets rewarded when fundamentals eventually catch up to perception.
Labor Costs Finally Normalizing
Another tailwind gaining attention: wage pressures appear to be easing. After years of elevated increases across retail, this operator’s labor inflation is showing signs of moderation.
Lower wage growth directly boosts margins, especially for a business with such high employee tenure and customer service emphasis. Happy workers tend to create happy shoppers, and now that virtuous cycle might become more profitable too.
It’s one of those quiet improvements that doesn’t make splashy headlines but meaningfully impacts the bottom line over time.
The Special Dividend Wildcard
Long-time shareholders know the occasional surprise that management likes to spring: special cash dividends.
With a fortress balance sheet and growing free cash flow, another one-off payout wouldn’t shock anyone. These events have historically acted as powerful catalysts, reminding investors of the company’s capital allocation prowess.
Timing remains anyone’s guess, but the setup feels increasingly favorable. Strong cash generation meets relatively depressed valuation—classic ingredients.
Valuation in Historical Context
Stepping back, current multiples don’t scream obvious bargain, but they certainly look reasonable given the quality.
Premium retailers with durable moats rarely trade at deep discounts. The question becomes whether today’s price adequately compensates for future growth prospects.
Given consistently high returns on invested capital, expanding unit count, and sticky membership economics, many long-term thinkers would argue yes.
- Exceptional renewal rates underpin predictable revenue
- Unit economics remain among the best in retail
- International expansion still in early innings
- Defensive characteristics during economic uncertainty
These factors rarely disappear overnight.
Risks Worth Acknowledging
No investment conversation feels complete without addressing potential pitfalls. Competition remains fierce. Consumer spending patterns could shift. Execution risks always exist with aggressive growth plans.
Yet what stands out is how often this company has navigated challenges successfully. The membership model creates powerful switching costs. Scale advantages compound. Brand equity runs deep.
In many ways, the biggest risk might be simply missing the forest for the trees—over-focusing on short-term noise while ignoring decades of proven execution.
Looking Ahead to 2026 and Beyond
As we settle into the new year, the setup appears increasingly constructive. Temporary headwinds from expansion should gradually fade. Underlying demand trends remain robust. Margin tailwinds emerge.
For investors with a multi-year horizon, moments like these often become fond memories. The chance to own shares of an elite operator at a slightly more attractive entry point.
Only time will tell, of course. Markets love to surprise. But the weight of evidence suggests optimism is warranted.
Whether you’re already a shareholder adding on weakness or considering a new position, the coming months could prove interesting. Sometimes the best opportunities hide in plain sight—disguised as temporary disappointment.
At the end of the day, great businesses tend to reward those who look past near-term turbulence toward enduring strengths. And few retailers match this one’s track record of creating shareholder value over decades.
Here’s to thoughtful investing in 2026.
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