u/Chuck-AP

Costco trades at ~42x forward earnings, priced for perfection in a softening macro environment. My bearish tilt into earnings rests on three quantitative flags:

First, gross margin compression. Despite net sales growth, core merchandise margins have contracted sequentially for three quarters. SG&A leverage has masked this, but inflationary stickiness in labor and logistics is real. The high margin ancillary revenue stream aka membership fees faces comp headwinds. With retail sales data showing durable goods deflation and big ticket pullback, average transaction value growth is stalling.

Second, membership income, the earnings backbone, is maturing. Executive penetration growth has decelerated. A fee increase remains speculative, yet already priced in. If guidance disappoints, the multiple contracts fast.

Third, options market dynamics. Implied volatility rank is elevated above 90th percentile, but realized moves have underperformed IV post-earnings in three of the last four prints. I'm buying outright puts for convexity, capturing skew and positioning for a sharp vol crush if they merely meet consensus.

Valuation is the killer. At this multiple, any earnings-per-share beat must come from buybacks or cost cutting, not top line strength. The risk/reward entering the print is asymmetric to the downside. Hard catalyst: membership income miss and tepid comp guidance.

Position: 29 May 26 COST $1000 Put x 20 contracts. Defined capital at risk, targeting IV crush and multiple compression. Earnings are May 28th after the bell.

Cheers, Regards! 🥂

Costco at a 55 P/E for slinging rotisserie chickens at a loss and 40-pound tubs of mayonnaise. What are we doing here?

You regards act like this is a tech company. It's a warehouse. With concrete floors. Selling cheese blocks the size of car batteries. The membership fee hike already hit. That was the pop. Now you're bag-holding peak expectations with consumer credit cards maxed out and deli meat inflation running hotter than my ex-wife's temper.

"bUt cOsTcO iS rEcEsSiOn-pRoOf" — shut up. When people actually pull back, they're not renewing executive memberships. They're buying toilet paper at Walmart like peasants. The trade-down is real, and Costco's comps are about to show it.

IV is juiced into orbit because everyone thinks this stock only prints green. Sell call spreads or buy puts. The IV crush alone buys your tendies. Even a 3% dip and you're eating lobster bisque off your wife's boyfriend's chest.

$COST 840P. June 21. Defined risk, maximum disrespect.

Fade the euphoria. Short the hot dog. These members are about to start sneaking samples as dinner.

Not financial advice, I'm banned from the food court for double-dipping.