The commentary surrounding the fiscal 2025 first quarter results for Costco Wholesale Corporation ranged from “mixed” to “beats” to “strong” on Thursday, December 12 after the retail warehouse giant posted its operating results for the twelve weeks ended November 24.

Net sales for the first quarter increased 7.5 percent to $60.99 billion from $56.72 billion in Q1 last year. Total revenue, which includes membership fees, rose nearly 7 percent to $62.15 billion for the quarter. Analysts were reportedly estimating total revenue to be $62.33 billion for the quarter. Paid membership grew 7.5 percent year-over-year and membership fee income (MFI) rose by 8 percent.

Paid memberships were up 7.6 percent year-over-year to 77.4 million paid members compared to store growth of 3 percent. Executive memberships are 47 percent of total members, up 100 basis points year-over-year and those members account for 73.1 percent of net sales.

Comparable sales for the first quarter fiscal 2025 were as follows:

Costco executives said on a conference call with analysts that the consumer is healthy and is still spending on non-food/discretionary items and is still gravitating towards value. Other key points:

  • Traffic was up 5.1 percent globally and up 4.9 percent in U.S.
  • Average ticket value was up 0.1 percent globally and up 0.3 percent in the U.S.
  • Ex-FX and gas, the average ticket would have been up 2 percent globally and up 2.3 percent in the U.S. year-over-year.
  • Items per basket were up 2 percent in the quarter after being slightly positive in Q4.
  • Seeing “very strong” sell-through of holiday items.
  • Private Label is growing slightly faster than the rest of the business.
  • Private label penetration is 33 percent of net sales.
  • Seeing a shift towards “food at home” with members.
  • Fresh was the best performing category, up high single digits.
  • Gas sales were down low double digits due to a low-double-digit decline in the average gas prices.

Gross margin for the quarter improved 24 basis points year-over-year to 11.3 percent of sales, which was also said to be “above expectations.”

Net income for the quarter was $1.80 billion, or $4.04 per diluted share, compared to $1.59 billion, or $3.58 per diluted share, in the prior-year Q1 period

This year’s results included a tax benefit of $100 million, or 22 cents per diluted share, related to stock-based compensation, compared to a prior-year Q1 tax benefit of $44 million, or 10 cents per diluted share.

Street View
While the feedback on the Street was mostly positive, the reaction was said to be most likely due to the “high bar” set by the stock’s valuation, according to Baird analysts. “Net, COST’s traction with consumers remains best in class,” they said in a note, reiterating an “Outperform” rating on the stock.

D.A. Davidson analysts shared similar post-earnings remarks, writing, “COST’s offering is clearly resonating with consumers, but we maintain our Neutral rating with the stock trading at 54x consensus estimates for FY2025.”

Paul Lejuuez and the team at Citi called it “Another Quarter of Solid Execution” in their day-after note. “We expect shares to trade slightly higher on the in-line quarter and relatively positive Holiday commentary from mgmt,” the Citi team wrote. Citi maintained its “Neutral” rating on the stock. They said it is clear that Costco “continues to take share” as they deliver quality and value to their members.

Costco currently operates 897 warehouses, including 617 in the United States and Puerto Rico, 109 in Canada, 41 in Mexico, 36 in Japan, 29 in the United Kingdom, 19 in Korea, 15 in Australia, 14 in Taiwan, seven in China, five in Spain, two in France, and one each in Iceland, New Zealand and Sweden. Costco also operates e-commerce sites in the U.S., Canada, the U.K., Mexico, Korea, Taiwan, Japan and Australia.

In the next fiscal year, Costco plans to open 20 more warehouses with continued growth of 13 percent increase for its e-commerce sales. Membership fee increases are expected to drive higher revenue from memberships.

Image courtesy Costco Wholesale Corporation