COST – Market expectations are for material Uniform ROA expansion, but management may be concerned about SG&A costs, membership growth, and app adoption

• Costco Wholesale Corporation (COST:USA) currently trades near historical highs relative to UAFRS-based (Uniform) Earnings, with a 34.5x Uniform P/E, implying bullish expectations for the firm. However, management may be concerned about SG&A costs, membership growth, and app adoption
• Specifically, management may lack confidence in their ability to sustain average transaction growth, and they may be concerned about further increases to their SG&A costs. Furthermore, they may lack confidence in their ability to drive membership growth through promotions, and they may be overstating the inelasticity of their higher-end items. Finally, they may lack confidence in their ability to drive further adoption of their mobile app and realize cost savings through vertical integration.