During the first six months of the COVID-19 pandemic, consumers flocked to Costco Wholesale (NASDAQ:COST). Costco members clearly valued the ability to buy a wide range of food, household essentials, and discretionary items at great prices in a single stop.

Many investors questioned whether the uptick in Costco's sales growth last year was sustainable. Yet despite facing increasingly tough comparisons, Costco has announced a string of phenomenal sales results this year. That streak continued this week, as the warehouse club giant reported incredible sales growth for August, the final month of its 2021 fiscal year.

Sales momentum accelerates a bit

Costco's adjusted comparable sales (excluding the impact of gasoline price inflation and currency fluctuations) rose 8% in July. That was an impressive result, coming on top of 15.8% adjusted comp sales growth a year earlier.

The retail giant posted even stronger growth in August, as adjusted comp sales increased 9.1%, despite another tough year-over-year comparison. Comp sales rose 10.1% in the U.S. -- Costco's most mature market -- outpacing the company average.

Interestingly, e-commerce comp sales inched up just 1.8% year over year last month, after doubling a year earlier. In other words, in-store sales drove virtually all of Costco's growth in August, as members continued to flock back to the company's warehouses despite a sharp uptick in U.S. COVID-19 case numbers and hospitalizations attributable to the delta variant.

The entrance to a Costco warehouse.

Image source: Costco Wholesale.

Costco recorded mid-to-high single-digit comp sales growth for all of its core merchandise categories in August. But comp sales skyrocketed more than 40% for its ancillary businesses -- led by its gas stations, food courts, and pharmacies -- boosting the company's adjusted comp sales growth to more than 9%.

Including the tailwinds from higher gas prices and a weaker U.S. dollar, raw comparable sales jumped 14.2% last month, and net sales reached $15.75 billion: up 16.2% year over year.

An excellent finish to a phenomenal year

Investors shouldn't make any major decisions based on a single month of sales. However, Costco's stellar August sales report capped a year of consistently strong growth.

For its full 2021 fiscal year, Costco posted 13.4% adjusted comparable sales growth. It grew its top line by nearly $30 billion, as net sales surged 17.7% to $192.1 billion, compared to $163.2 billion in fiscal 2020. For the fourth fiscal quarter, net sales rose 17.4% to $61.4 billion, beating the average analyst estimate by more than $1 billion.

Costco's ability to grow at such an impressive rate over the course of an entire year should give investors confidence that the company's recent market share gains will prove durable.

Costco stock may be ready for a breather

Investors have rewarded Costco richly for its excellent results. Costco stock has gained more than 30% over the past year, reaching a new all-time high on Thursday. The shares have rallied 50% since touching a 52-week low in early March.

COST Chart

Costco Wholesale stock performance, data by YCharts.

As a result, Costco stock now trades for nearly 40 times forward earnings. This is an unprecedented valuation for the company.

On the bright side, Costco has enormous long-term expansion potential. It currently operates in about a dozen countries, showing the broad appeal of its business model. Nevertheless, more than 80% of its warehouses are located in the U.S. and Canada, and those two core markets still account for the bulk of its store growth. This implies that Costco has a huge runway for international expansion.

On the other hand, Costco opens new locations at a very deliberate pace, so store growth only drives about 2% annual sales growth for the company. Meanwhile, a temporary jump in inflation and a short-term surge in retail spending have powered unusually high sales growth for Costco and many other retailers this year. Comp sales gains will likely moderate going forward. Finally, Costco's operating margin had been quite stable prior to the pandemic, suggesting that in the long run, its earnings will grow only as quickly as sales.

COST Operating Margin (TTM) Chart

Costco Wholesale operating margin (TTM), data by YCharts. TTM = trailing 12 months.

Based on these factors, investors can potentially expect 10% annual long-term earnings growth from Costco. That's quite solid, but investors interested in buying Costco stock still might find it worthwhile to wait for a better entry price.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.