Costco Wholesale Corporation (NASDAQ: COST) has delivered an impressive performance in the first half of FY25, aided by strong membership renewal rates and an increase in fee income, catalyzed by recent fee hikes. The company is actively expanding its store network, with a total of 28 store openings planned in fiscal 2025.
The market will be keeping a close watch on the warehouse behemoth’s upcoming earnings report, looking for insights into the impact of new tariffs on the business and the broader industry. The company is expected to report its third-quarter results on Thursday, May 29, at 4:15 pm ET. It is estimated that earnings grew 12% year-over-year to $4.23 per share in Q3. Analysts’ positive earnings outlook reflects an estimated 7.8% increase in revenues to $63.1 billion.
At the Bourses
After gaining steadily in the early weeks of the year, Costco’s stock set a new record in mid-February but reversed course since then, slipping to a four-month low. However, the shares regained strength recently and are approaching their previous highs. COST has grown about 10% so far in 2025, and traded above the $1,000 mark this week. Costco’s continued dominance in the warehouse retail market, demonstrated by a 93% membership renewal rate in the US and Canada last quarter, underscores its customer loyalty. This competitive advantage, reinforced by consistent revenue growth and profitability, enhances its appeal as an investment option.
Costco’s CEO Ron Vachris said during the Q2 earnings call, “As we look ahead to the remainder of this fiscal year, headwinds from foreign exchange look likely to continue. Given events over the last week, it is difficult to predict the impact of tariffs, but our team remains agile and our goal will be to minimize the impact of related cost increases to our members. About a third of our sales in the U.S. are imported from other countries, and less than half of those are items coming from China, Mexico, and Canada.”
Earnings Miss
Costco’s comparable store sales increased 6.8% year-over-year in the second quarter of 2025, and e-commerce sales advanced 21%. Revenues increased to $63.7 billion in Q2 from $58.4 billion in the prior year quarter, exceeding estimates. Net income rose to $1.79 billion or $4.02 per share in Q2 from $1.74 billion or $3.92 per share in Q2 2024. The bottom-line performance fell short of expectations, after consistently beating estimates for six quarters.
The company’s pricing strategy and adjustments to product mix enable it to navigate through changing consumer habits and macroeconomic headwinds. It is likely to deliver sustained growth across key metrics such as sales, earnings, and cash flow in the coming years.
Tariff Woes
While there is an uptick in membership fee income, the company expects its bottom line to remain under pressure from unfavorable exchange rates. It also faces headwinds from the new import tariffs, since a third of the merchandise sold in Costco stores is imported, with about half of them coming from China Canada, and Mexico.
After recovering from last month’s lows, Costco’s stock has traded mostly above its 52-week average value. On Friday, the shares traded slightly lower in early trading.
