Costco reported better-than-expected revenue and earnings for the last quarter; even after excluding the boost from tariff refunds, profits still exceeded market forecasts. However, growth in membership fee revenue slowed, and the stock saw a muted reaction in after-hours trading.
On Thursday, Costco announced earnings per share of $6.75 for the fiscal fourth quarter ending August 30, surpassing the $6.54 estimate by analysts; even excluding the 15-cent benefit from tariff refunds, earnings stood at $6.60. Revenue grew 11% to $95.72 billion, also beating market expectations.
Comparable-store sales rose 9.4%; excluding the impact of gasoline prices and currency fluctuations, the increase was 6.7%. Store traffic increased by 3.3%, while comparable sales driven by online and other digital channels grew by nearly 20%. Costco had previously lowered prices on select items under its private-label brand, Kirkland Signature, and membership renewal rates improved for the second consecutive quarter.
However, while membership fee revenue rose 7.3% to $1.85 billion, the growth rate was slower than the 10.7% seen in the previous quarter. Bryan Hayes, an analyst at Zacks Investment Research, noted that while it was a solid earnings report, Costco’s stock is trading at 40 times projected earnings—a valuation where investors expect more than just “solid” performance. Costco’s stock rose only about 0.2% in after-hours trading on Thursday.
Costco executives stated that the company received approximately $184 million in tariff refunds last quarter, with a similar amount received so far this quarter. Costco primarily used these refunds to lower prices on meat, produce, beverages, and furniture. The gasoline and travel businesses performed well, and sales of furniture, small electronics, and beauty products also saw growth. CFO Gary Millerchip noted that although rising memory chip prices drove up the cost of some electronics, consumers remained willing to spend when they saw attractive, well-priced new products. Costco is also actively courting younger members; the number of members under the age of 40 has risen by nearly 60% compared to pre-pandemic levels, and they now account for more than a quarter of the company’s shoppers. CEO Ron Vachris noted that while younger members tend to spend less initially, their spending increases over time. Additionally, Costco is expanding its service reach through delivery partners, announcing this month that it is extending its Uber Eats delivery service to 47 U.S. states.