Costco earnings beat estimates, showing consumers are prioritizing value

Costco Wholesale earnings met Wall Street expectations after concerns tariffs and inflation would lead to consumer pullback and impact the retailer’s earnings. 

The grocery chain reported an earnings per share of $5.87 on a revenue of $86.16 billion after the bell on Thursday for its fiscal fourth quarter earnings.

Costco’s net sales rose 8% to $84.4 billion compared to $78.2 billion in net sales during the same quarter last year. Comparable sales in the U.S. last quarter increased 6% on an adjusted basis and rose 6.4% for the whole company. The retailer saw a jump in its e-commerce sales with an increase of 13.5%. 

Wall street projected Costco would report an EPS of $5.80 on a $86 billion revenue. It expected same-store sales to grow by 5.9% from the same time last year, Barron’s reported based on FactSet consensus estimates. 

The Motley Fool said that Costco “revolves around the annual fees” — and this quarter membership fees brought in $1.7 billion in revenue, a 14% increase year-over-year. Zacks Research said Tuesday that the retailer’s high membership renewal rates — which it added frequently surpass 90% — show Costco’s “strong customer loyalty” and create a “dependable revenue source.” 

At the end of June, Costco began offering an extra hour of shopping time for executive members at some locations. It said this change added 1% to its sales in an earnings call.

“Costco’s supply-chain capabilities, strong vendor relationships and pricing discipline leave it better positioned than most to navigate any tariff-related pressures,” Raymond James analysts said in a Monday note, MarketWatch reported. “Importantly, in a potentially more inflationary environment, the club model’s value proposition and scale advantage could become even more compelling to consumers.”

Oppenheimer analysts said in a note last week that Costco is “up against very difficult comparison in the nonfoods category” ahead of its earnings release, noting that the retailer’s stock has dropped after four of its last six earnings, the outlet reported. 

Barron’s said that Costco is one of the “steadiest performers” in retail, but caveats that Wall Street is starting to question how “sustainable” its high valuation is. Raymond James analysts said the company’s stock valuation was "challenging versus historical standards,” MarketWatch said. 

Costco’s stock is up about 3.8% so far this year and was down less than 1% after the market closed.