COSTCO WHOLESALE CORP /NEW (COST) Q2 2025 Earnings Summary

Executive Summary

Q2 FY2025 delivered solid top-line growth and resilient margins: net sales rose 9.1% to $62.53B with total revenue at $63.72B; gross margin expanded 5bps to 10.85% and SG&A leveraged 8–9bps year over year .
Versus estimates, revenue modestly beat by ~1.0% while EPS was slightly below consensus, largely reflecting FX translation headwinds and lower “interest income and other” vs last year; excluding last year’s tax benefit, EPS growth was +8.4% *.
Traffic remained robust (+5.7% worldwide) with significant e-commerce momentum (+20.9% reported; +22.2% adjusted), and membership metrics strengthened (paid members +6.8% YoY; U.S./Canada renewal 93.0%) .
Management highlighted continued investment in employees (new wage agreement starting March 3) and technology/personalization, a full-year CapEx plan of ~$5B, and a pipeline of ~28 FY25 warehouse openings (25 net) as catalysts; FX and potential tariffs are noted headwinds .
Near-term stock narrative drivers: strong comps and digital execution, forthcoming membership fee uplift timing (largest in Q4 FY25/Q1 FY26), and wage investments’ SG&A impact offset by productivity initiatives .

What Went Well and What Went Wrong

What Went Well

Strong sales and comps: net sales +9.1% to $62.53B; total company comps +6.8% (+9.1% adjusted), e-commerce comps +20.9% (+22.2% adjusted) .
Margin resilience: gross margin rate up 5bps to 10.85% (core +5bps; LIFO credit $12M); SG&A rate improved by 8–9bps driven by higher labor productivity and cost discipline .
Membership and digital momentum: membership fee income $1.193B (+7.4% YoY, +9.4% ex-FX), paid members 78.4MM, U.S./Canada renewal 93.0%; 43M visits to the new warehouse tool, site traffic +13%, AOV +10% .

Management quote: “Our operations and merchandising teams did a fantastic job… delivering strong operating results despite the uncertain macro environment.”

What Went Wrong

EPS slightly below consensus despite underlying growth: diluted EPS $4.02 vs consensus ~~$4.096; FX translation negatively impacted net income by $57M (~~$0.13/share), and interest and other gains were lower YoY *.
Core-on-core margins down 8bps due to supply chain investments and nonfood mix; lower gas profitability offset strong e-commerce .
Emerging cost headwinds: new wage agreement implies ~13bps SG&A headwind from March 3 (net mid-single-digit YoY headwind) and ongoing FX pressures; gas volumes down in February on weather .

Financial Results

Metric	Q4 FY2024	Q1 FY2025	Q2 FY2025
Net Sales ($USD Billions)	$78.19	$60.99	$62.53
Membership Fees ($USD Billions)	$1.512	$1.166	$1.193
Total Revenue ($USD Billions)	$79.70	$62.15	$63.72
Operating Income ($USD Billions)	$3.042	$2.196	$2.316
Net Income ($USD Billions)	$2.354	$1.798	$1.788
Diluted EPS ($USD)	$5.29	$4.04	$4.02
Gross Margin (%)	11.00%	11.28%	10.85%
SG&A (%)	9.04%	9.59%	9.06%

Notes:

Q4 FY2024 was a 16-week quarter vs 12 weeks in Q1/Q2 FY2025 .
Last year’s Q2 included a $94M tax benefit ($0.21/share) related to special dividend deductibility, impacting YoY EPS comparability .

Segment breakdown (Q2 FY2025):

Segment	Reported Comp Sales (%)	Adjusted Comp Sales (%)*
U.S.	8.3%	8.6%
Canada	4.6%	10.5%
Other International	1.7%	10.3%
Total Company	6.8%	9.1%
E-commerce	20.9%	22.2%

*Adjusted excludes gasoline and foreign exchange impacts.

Comps trend (Total Company and E-comm):

Metric	Q4 FY2024	Q1 FY2025	Q2 FY2025
Total Company Comps (%)	5.4%	5.2%	6.8%
Total Company Adjusted Comps (%)	6.9%	7.1%	9.1%
E-commerce Comps (%)	18.9%	13.0%	20.9%
E-commerce Adjusted Comps (%)	19.5%	13.2%	22.2%

KPIs and traffic/ticket:

KPI	Q4 FY2024	Q1 FY2025	Q2 FY2025
Paid Members (MM)	76.2	77.4	78.4
Total Cardholders (MM)	136.8	138.8	140.6
Executive Members (MM)	35.4	36.4	36.9
U.S./Canada Renewal Rate (%)	92.9%	92.8%	93.0%
Worldwide Renewal Rate (%)	90.5%	90.4%	90.5%
Executive Penetration of Sales (%)	73.5%	73.1%	73.8%
Worldwide Traffic Growth (%)	6.4%	5.1%	5.7%
Worldwide Ticket Growth (%)	-0.9%	0.1%	1.0% (3.2% adj.)

Estimate comparison:

Metric	Q1 FY2025	Q2 FY2025
EPS (Actual vs Consensus)	$4.04 vs $3.796*	$4.02 vs $4.0958*
Revenue (Actual vs Consensus, $B)	$62.15 vs $61.995*	$63.72 vs $63.111*
# of EPS Estimates	25*	26*
# of Revenue Estimates	17*	25*

Values retrieved from S&P Global.*

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Capital Expenditure	FY2025	N/A	~$5B full-year CapEx	Initiated/Quantified
Wage Agreement SG&A Impact	From Mar 3, 2025	N/A	~13bps SG&A headwind from Mar 3; net YoY headwind mid-single-digit bps; one-time vacation accrual catch-up in Q3	New headwind
Membership Fee Increase Benefit Timing	Next 4 quarters	N/A	Majority of benefit recognized over next 4 fiscal quarters; largest in Q4 FY25 and Q1 FY26	Timing specified
Warehouse Openings	FY2025	25–30 per year long-term	~28 openings in FY25; 25 net new buildings	Reaffirmed pipeline
Tax Rate	Q2 FY2025	Prior-year Q2 adjusted ~26.3% (ex discrete)	Q2 tax rate 26.2%	Normalized
Gas Station Hours	North America	N/A	Extended hours (generally 1 hour later; some earlier)	Operational enhancement

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 FY2024 and Q1 FY2025)	Current Period (Q2 FY2025)	Trend
Digital & Personalization	E-comm comps strong; app search and inventory lookup improvements; site traffic +8% (Q4)	New warehouse tool drew 43M visits; site traffic +13%; AOV +10%; first personalized digital mailer test; retail media campaigns (~10 live); “few hundred million” existing e-comm ad revenue baseline	Accelerating personalization and retail media ramp
Membership Strength	Q4/Q1 renewal rates ~90–91% WW; exec penetration >73%	Membership fees +7.4% (+9.4% ex-FX); U.S./Canada renewal 93.0%; exec penetration 73.8%; fee increase benefit mostly ahead	Stable-to-improving; future uplift
Supply Chain & Mix	Q1 gross margin +24bps; core-on-core +3bps; proactive inventory buys in nonfood	Core-on-core down 8bps due to supply chain investments and nonfood mix; overall gross margin +5bps; LIFO credit $12M	Investing to support demand; slight core pressure
Tariffs/Macro	Standard macro caution (Q4/Q1)	Prepared to mitigate tariffs via nimble sourcing and supplier partnerships; ~1/3 of U.S. sales imported; <½ of those from China/Mexico/Canada; FX headwinds likely to continue	Heightened monitoring and mitigation plans
Store Ops & Throughput	Strong traffic; app inventory lookup introduced (Q4)	Front-door scanning improves staffing; self-checkout focus; considering extended store hours (no plans yet); gas hours extended	Operational efficiencies progressing
Regional Trends	Q4 comps balanced U.S/Canada/Intl	U.S. strong; Canada outstanding on constant currency; Intl adjusted comps robust; Feb strongest in Midwest/Northeast/LA; Mexico/Taiwan/Korea strong locally	Broad-based strength; FX drags reported

Management Commentary

“We’re projecting 28 new openings during fiscal year ’25… the Sharon, Massachusetts opening on March 12… our 620th U.S. warehouse and the 900th Costco location worldwide.” — Ron Vachris
“Excluding [last year’s] discrete tax item, net income and earnings per diluted share both grew 8.4%.” — Gary Millerchip
“Our reported [gross margin] rate… was higher by 5 basis points… SG&A… lower or better by 8–9 basis points… Higher labor productivity and great cost discipline drove this improvement.” — Gary Millerchip
“We aim to be the first to lower prices… and the last to increase prices… Examples include KS Olive Oil $29.99→$27.99, KS Organic Peanut Butter $11.49→$9.99, KS Tortilla Strips $5.69→$4.99.” — Gary Millerchip
“We made improvements to our co-brand credit card… Executive Members… double their cash back… gas purchases… reward increased to 5%.” — Gary Millerchip

Q&A Highlights

Consumer health and mix: Members remain willing to spend but are more “choiceful”; signs of spend shift toward food at home; fresh strong with bifurcation to lower-cost proteins; Canada strong on constant currency .
Margins: Core-on-core down 8bps due to supply chain and mix; overall gross margin improved; deliberate investment in member value continues .
Tariffs and weather: Weather modestly impacted February; tariff mitigation via flexible sourcing and buyer efficiency; grocery margin pass-through managed case-by-case .
Wage investment and productivity: New agreement adds ~13bps SG&A headwind from March 3; net mid-single-digit YoY headwind; focus on labor productivity to offset; one-time vacation accrual catch-up in Q3 .
Digital personalization and media: Personalized digital MVM initiated; ~40M recipients; incremental to mailed MVM; early engagement promising; retail media pipeline growing .

Estimates Context

Q2 FY2025: Revenue beat (~$63.72B vs ~$63.11B consensus); EPS slight miss ($4.02 vs ~$4.096). Headwinds from FX (−$57M) and lower interest/other gains YoY contributed to the delta *.
Q1 FY2025: Revenue and EPS both beat (EPS $4.04 vs ~$3.796; revenue $62.15B vs ~$61.995B)*.
Estimate coverage remains robust (Q2: ~26 EPS estimates, ~25 revenue; Q1: ~25 EPS, ~17 revenue)*.