COSTCO WHOLESALE CORP /NEW (COST) Q1 2025 Earnings Summary

Executive Summary

• Q1 FY2025 delivered solid topline growth and margin expansion: net sales $60.99B (+7.5% YoY), EPS $4.04 (+12.8% YoY), with gross margin up 24 bps to 11.28% and SG&A up 14 bps to 9.59% as wage investments partially offset leverage .
• Traffic and engagement remain strong (global traffic +5.1%), with e-commerce comps +13.0% (+13.2% ex-FX) and Costco Logistics hitting new delivery records; management highlighted “early innings” retail media with 2–3x ROAS in an initial campaign .
• Membership metrics grew: fee income +7.8%, paid households 77.4MM (+7.6% YoY), Executive penetration 73.1% of sales; renewal rates ticked down 10 bps sequentially due to mix shift to digital sign-ups (U.S/Canada 92.8%; worldwide 90.4%) .
• No formal numerical guidance; management reiterated FY2025 CapEx ~$5B, 29 openings (26 net, 10 international), and flagged interest income as a YoY headwind in Q2; quarterly dividend maintained at $1.16/share in October .
• Estimates comparison unavailable: S&P Global consensus data could not be retrieved at this time; result-to-estimate deltas are not presented (consensus unavailable).

What Went Well and What Went Wrong

What Went Well

• E-commerce strength and logistics execution: e-comm comps +13.0% (+13.2% ex-FX); Costco Logistics completed nearly 1M deliveries in Q1, with 196K in a single week and most deliveries within 4 days .
• Margin improvement despite price investment: reported gross margin up 24 bps (ex-gas +7 bps), with core margin +31 bps (ex-gas +17 bps) aided by mix and co-brand credit program; core-on-core +3 bps .
• Membership growth and engagement: fee income +7.8%; Executive members 36.4MM, representing 73.1% of sales; quote: “Our goal is always to be the first to lower prices where we see the opportunities to do so” – Gary Millerchip .

What Went Wrong

• SG&A deleverage from wage increases: reported SG&A rate up 14 bps (ex-gas flat), with operations +15 bps (ex-gas +4 bps), reflecting higher employee wages effective in July .
• Gas-related headwinds: ancillary/other gross margin down 12 bps (ex-gas −16 bps), cycling prior Middle East-related volatility; gas sales negative low double digits on lower average price per gallon .
• Slight renewal-rate pressure: U.S/Canada renewal down 10 bps QoQ to 92.8%, worldwide 90.4%, driven by higher mix of digital sign-ups that renew at slightly lower rates .

Financial Results

YoY snapshot (Q1 FY2025 vs Q1 FY2024):

Comparable sales (12 weeks):

KPIs:

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Our goal is always to be the first to lower prices where we see the opportunities to do so,” with examples in Kirkland Signature items (e.g., Organic Peanut Butter $11.49→$9.99; Chicken Stock $9.99→$8.99) .
• “We continue to believe [retail media] represents a significant growth opportunity… the campaign achieved 2 to 3x the return on ad spend” .
• On openings: “We continue to project 29 openings during fiscal year ’25… ten of those warehouses will be outside of the U.S.” .
• On tariffs: “In general, of course, tariffs raise costs… we have a plan… pull forward buys, work with vendors, consider alternative sourcing, pivot SKUs as needed” .

Q&A Highlights

• Consumer health and discretionary mix: strong nonfoods (gold/jewelry, gift cards, home furnishings, sporting goods, HBA, hardware); food-at-home shift; bifurcation to lower-cost proteins alongside premium cuts .
• Core margin bridge: core-on-core +3 bps; headwinds from gas cycling; offsets from e-commerce margin improvement, mix, co-brand credit program .
• Digital penetration and partnerships: reported 7–8% (north of 10% incl. third-party and ex-gas); strong growth via Instacart/Uber; logistics faster and more cost-effective for small nonfood deliveries .
• Scan & Go stance: focus on self-checkout and front-end productivity (door scanners) versus Scan & Go; continued tech vigilance .
• CapEx and expansion: FY2025 CapEx ~$5B; steady 25–30 annual net new warehouses, with meaningful international pipeline .

Estimates Context

• S&P Global consensus estimates for Q1 FY2025 were unavailable to retrieve at this time; result-to-estimate comparisons are not presented. Values would normally be retrieved from S&P Global.

Key Takeaways for Investors

• Resilient demand with traffic-led growth and e-commerce momentum underpinning topline; strength across nonfoods and fresh supports multi-category resilience .
• Margin trajectory positive: core margin expansion and e-commerce margin gains offset gas volatility and higher wage costs; watch SG&A as wage investments annualize .
• Membership engine remains robust despite slight renewal mix headwind; Executive penetration at 73.1% of sales enhances 2% rewards leverage and loyalty .
• Near-term headwind: interest income will pressure YoY in Q2 given lower cash balances/rates; this may temper EPS cadence intra-year .
• Capital deployment: FY2025 CapEx ~$5B, aggressive footprint growth (29 openings) and global expansion should sustain traffic and sales density .
• Strategic optionality: retail media early but promising (2–3x ROAS), potential to augment profitability and offset digital cost-to-serve over time .
• Tactical watch items: gas price dynamics, supply chain disruptions (ports/Red Sea), tariff risk; management outlined mitigation levers (inventory pull-forward, alt sourcing) .