Costco reported its second-quarter earnings on Thursday, missing earnings expectations but surpassing revenue estimates. Despite a slight decline of over 1% in its stock during extended trading, the company posted a solid quarter. The wholesale retailer reported earnings of $4.02 per share, which fell short of the expected $4.11, but its revenue of $63.72 billion exceeded the anticipated $63.13 billion. Comparable sales, which include both warehouse and e-commerce sites open for more than a year, increased by 6.8%, outpacing Wall Street’s forecast of a 6.4% rise.
Costco CEO Ron Vachris highlighted the challenges posed by ongoing tariffs, particularly in the grocery sector, where margins are tight. He emphasized the company’s strategy to mitigate cost increases for its members through strong supplier relationships, global buying power, and innovation. Despite rising tariffs, particularly on imports from China, Mexico, and Canada, Costco intends to minimize any negative impacts on consumers, especially in the grocery category where margins are tighter. A third of Costco’s U.S. sales come from imports, with less than half of those sourced from the affected countries.
Revenue for the quarter grew by 9% compared to the previous year, rising from $58.44 billion to $63.72 billion. Membership fees also showed growth, totaling $1.19 billion, up from $1.11 billion in the previous year. Membership renewal rates saw a slight increase, reaching 90.5%. The company also raised its U.S. and Canadian membership fees in September for the first time in six years, although this only accounted for a modest 3% increase in the fee total for the quarter.
In terms of sales growth, Costco saw significant gains in categories such as gold and jewelry, furniture, hardware, and toys, all of which grew by double digits. Traffic to Costco’s stores increased by 5.7%, with e-commerce sales rising by 20.9%. Despite a slight dip in sales growth in February due to extreme weather, Costco managed to recover much of the lost business. The company’s fresh food category saw growth in the high single digits, driven by strong sales in the meat and bakery sections. Costco’s ability to maintain its value proposition amidst inflationary pressures remains central to its strategy.
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