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Although Costco (COST) has historically represented a reliable stalwart in the retail space, its latest bout of volatility raises fresh concerns. Despite the company delivering the goods on both the top and bottom line, COST stock fell about 2% in the early afternoon session. Since the beginning of this year, the equity is now up less than 1%, a far cry from the S&P 500’s gain of 12.5%.

At first glance, the bearishness makes little sense. For the fiscal fourth quarter, Costco posted earnings per share of $5.87, beating Wall Street analysts’ consensus target of $5.80. On the top line, the membership-only retailer generated $86.16 billion, moving past the estimate of $86.06 billion. Further, the company’s net income landed at $2.61 billion on a nominal basis, above the $2.35 billion posted one year earlier.

So, what caused the slip-up in COST stock? Analysts are pointing the finger at same-store sales.

An industry metric which removes artificial distortions that may be caused by store openings and closures, same-store sales increased by 6.4% — excluding the impact from gas prices and foreign exchange fluctuations. On the surface, that might seem like a very solid figure. However, as CNBC pointed out, this statistic marks two quarters where it incurred deceleration.

Still, the skepticism toward COST stock may be a bit excessive. For one thing, the fundamentals appear to be surprisingly resilient. According to the Bureau of Economic Analysis, the economy grew 3.8% in the second quarter, jumping past expectations calling for 3% growth. It’s also a sharp turnaround from the 0.6% decline recorded in Q1.
 

One element to keep in mind, though, is options flow. On a cumulative basis for the month thus far, the flow in the derivatives market — which focuses exclusively on big block transactions — show net trade sentiment falling to $48.23 million below parity. On paper, this metric favors the bears and as evidence, COST stock has been on a sizable decline since the flow shifted negatively (around Sept. 10).

As investors potentially move back into COST stock, the first indicator may be an uptick in relative flow. For those who want to speculate ahead of time, the retailer could be on a temporary discount.

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