Costco reports mixed second-quarter earnings, comparable sales growth
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Costco
on Thursday reported an earnings miss, but beat expectations for revenue for the second quarter as quarterly comparable sales rose.
Shares ticked down over 1% in extended trading on Thursday evening.
Here’s how the wholesale company did compared with what Wall Street was expecting for the quarter ended Feb. 16, based on a survey of analysts by LSEG:
Costco CEO Ron Vachris said although it’s difficult to forecast the impact of tariffs, the company aims to minimize cost increases for members. A third of its U.S. sales are from imports, he said, and less than half of those come from China, Mexico and Canada.
“In uncertain times, our members have historically placed even greater importance on the value of high-quality items at great prices, and our teams will continue to rise to this challenge by leveraging our global buying power, strong supplier relationships and innovation,” Vachris said.
Citing tariff implications for groceries specifically, Vachris said margins are “much tighter” in that area, but that Costco will work with suppliers to mitigate the fallout for consumers.
President Donald Trump imposed 25% tariffs on Mexico and Canada and doubled his tariff on China to 20% this week, though the White House said Thursday that the U.S. will exempt goods that comply with the United States-Mexico-Canada Agreement on trade until April 2. Retailers like Target
and Best Buy
have warned that tariffs would likely lead to price increases.
Costco’s second-quarter revenue increased 9% to $63.72 billion, from $58.44 billion during the same quarter in fiscal 2024. Net sales for the quarter rose 9.1% to $62.53 billion, compared to $57.33 billion in the year-ago period.
Membership fees for the quarter totaled $1.19 billion, up from $1.11 billion in the second quarter of 2024, with the company reporting 78.4 million paid memberships and 140.6 million total cardholders. Worldwide, Costco’s membership renewal rate came in at 90.5%, an increase of 0.1% from last quarter.
The retailer raised its annual membership fees for the U.S. and Canada in September for the first time since 2017, though CFO Gary Millerchip said the impact of the increase on this quarter’s fee total was only 3%.
Costco reported a net income for the second quarter of $1.79 billion, or $4.02 per share, compared with a net income of $1.74 billion, or $3.92 per share, during the second quarter of fiscal 2024.
Quarterly comparable sales, which Costco defines as sales from warehouses and e-commerce sites open for more than a year, rose 6.8% year over year, compared with the StreetAccount estimate of 6.4%, and were up 8.3% in the U.S. Comparable sales for e-commerce rose 20.9% year over year.
On a monthly basis, comparable sales growth did fall from 7.5% in January to 6.5% in February. Extreme weather last month caused “some hits here and there,” Vachris said, but the company recovered most of that lost business.
Shopping traffic grew 5.7% year over year, with an increase of 5.6% in the U.S. The company’s top sales categories included gold and jewelry, furniture, hardware and toys, all of which grew double digits year over year, according to Millerchip.
Consumer behavior, Millerchip said, hasn’t changed much over the past few quarters. Costco members are selective with the products they purchase, he said, and would become even more so if tariffs and inflation grow more significant.
“We believe that the member is probably as much focused now on quality, value and newness as they have been for quite some time, but they are still showing that willingness to spend,” Millerchip said.
Costco’s fresh foods category experienced growth in the high single digits, Millerchip said. Continuing a trend from last quarter, sales of meat increased by double digits, Millerchip said, as consumers shifted toward lower-cost proteins like ground beef. Customers continued to spend more on food at home, he added.
The meat and bakery sections drove the fresh foods category to lead Costco’s categories in inflation, though overall inflation was in the low single digits, he added.
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Costco (COST) reported mixed results for its fiscal second quarter as shoppers remain cautious about their spending.
Adjusted earnings per share came in at $4.02, compared to Bloomberg consensus estimates of $4.11. Revenue of $63.72 billion slightly beat expectations of $63.01 billion.
Overall same-store sales jumped 6.8%, versus the 6.38% expected, though they fell short of estimates in Canada and other international markets. Same-store sales excluding fuel and the impact from foreign exchange are up 9.1%.
CEO Ron Vachris said on Costco’s earnings call, “Our operations and merchandising teams did a fantastic job in the quarter, delivering strong operating results despite the uncertain macro environment.”
Costco consumers are still focused on “quality, value, and newness, as they have been for quite some time,” CFO Gary Millerchip added. He said shoppers are willing to spend but remain “very choiceful,” a trend he expects to ramp up given “the impact of some return of inflation and the potential impact of tariffs.”
Read more: What Trump’s tariffs mean for the economy and your wallet
Costco stock fell slightly in after-market trading after the retailer released results. Year to date, shares are up over 12%, outpacing the nearly 3% decline for the S&P 500 (^GSPC).
Shares of its peers are also outperforming as consumers seek the biggest bang for their buck. BJ’s Wholesale Club (BJ) stock is up 28% this year, while Walmart (WMT), which owns Sam’s Club, is up 5.6%.
On Thursday morning, BJ’s beat the Street’s expectations on earnings and same store sales, with a slight miss on revenue. CEO Robert Eddy attributed the results to strength in traffic, increased basket sizes, and strong member engagement.
Shares of Kroger (KR), which is facing a CEO change and the fallout from its failed merger with Albertsons (ACI), are up nearly 3% year to date. Kroger reported fourth quarter earnings that matched estimates, with a beat on same-store sales and a slight miss on revenue. Digital sales fueled the growth, followed by its delivery network and health and wellness.
Here’s what Costco shared in its fiscal second quarter results, versus Bloomberg consensus estimates:
Revenue: $63.72 billion versus $63.01 billion
Adjusted earnings per share: $4.02 versus $4.11
Total company comparable sales growth: 6.8%, versus 6.38%
US same-store sales growth: 8.3%, versus 6.22%
Canada same-store sales growth: 4.6%, versus 4.73%
Other international sales growth: 1.7%, versus 4%
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