Investment Rating - The investment rating for Costco is maintained at "Neutral" [1][3]. Core Views - Costco's revenue for FY25 Q2 increased by 9.1% year-on-year to $62.5 billion, with net profit rising by 2.6% to $1.79 billion, and diluted EPS also up by 2.6% to $4.02 per share [3]. - Membership income grew by 7.4% year-on-year, with a global renewal rate of 90.5% and a membership count of 78.4 million, of which 36.9 million are premium members [3]. - E-commerce comparable sales surged by 20.9% year-on-year, driven by a 13% increase in website traffic and a 10% rise in average order value [3]. - The company plans to open 18 new warehouse stores globally in FY2025, increasing the total to 915 stores by the end of the fiscal year [3]. - Potential tariff issues may pressure the company's cost structure, as approximately one-third of products sold in the U.S. are imported, with nearly half sourced from China, Mexico, and Canada [3]. - Revenue projections for FY2025-2027 are expected to grow by 5.60%, 6.75%, and 5.60% respectively, with net profit growth of 8.30%, 3.77%, and 13.32% [3][4]. Financial Summary - FY2024 projected revenue is $254.453 billion, with a year-on-year growth of 5.02% [1]. - FY2025 projected revenue is $268.702 billion, with a year-on-year growth of 5.60% [1]. - FY2026 projected revenue is $286.840 billion, with a year-on-year growth of 6.75% [1]. - FY2027 projected revenue is $302.903 billion, with a year-on-year growth of 5.60% [1]. - FY2024 projected net profit is $7.367 billion, with a year-on-year growth of 17.09% [1]. - FY2025 projected net profit is $7.978 billion, with a year-on-year growth of 8.30% [1]. - FY2026 projected net profit is $8.279 billion, with a year-on-year growth of 3.77% [1]. - FY2027 projected net profit is $9.382 billion, with a year-on-year growth of 13.32% [1].

Investment Rating - The investment rating for Costco is maintained at "Neutral" [1][3]. Core Insights - Costco's revenue for FY25 Q2 increased by 9.1% year-on-year to $62.5 billion, with net profit rising by 2.6% to $1.79 billion and diluted EPS also up by 2.6% to $4.02 per share [3]. - Membership revenue grew by 7.4% year-on-year, with a global renewal rate of 90.5% and a membership count of 78.4 million, of which 36.9 million are premium members [3]. - E-commerce comparable sales surged by 20.9% year-on-year, driven by a 13% increase in website traffic and a 10% rise in average transaction value [3]. - The company plans to open 18 new warehouse stores globally in FY2025, increasing its total to 915 stores by the end of the fiscal year [3]. - Potential tariff issues may pressure the company's cost structure, as approximately one-third of its products sold in the U.S. are imported, with nearly half sourced from China, Mexico, and Canada [3]. Financial Projections - Revenue projections for FY2025-2027 are $268.7 billion, $286.8 billion, and $302.9 billion, reflecting year-on-year growth rates of 5.60%, 6.75%, and 5.60% respectively [1][3]. - Net profit forecasts for the same period are $7.98 billion, $8.28 billion, and $9.38 billion, with growth rates of 8.30%, 3.77%, and 13.32% respectively [1][3]. - The projected P/E ratios for FY2025-2027 are 51.97, 50.08, and 44.20 [1][3].

Core Viewpoint - Costco Wholesale is a well-established retailer with strong growth potential, particularly in international markets, but its high valuation may limit future returns [2][4][5]. Group 1: Company Performance - Costco has consistently demonstrated robust growth, achieving nearly double-digit growth rates over the past decade, even during challenging economic conditions such as the pandemic and inflation [2][3]. - The company has seen its stock price increase by 520% over the last 10 years, indicating strong investor confidence and performance [4]. Group 2: Market Presence - The majority of Costco's warehouses, 767 out of 897, are located in North America, with significant room for expansion in international markets, particularly in China where it currently operates only seven warehouses [3]. - The long-term growth opportunities in international markets position Costco as a potential top growth stock for the future [3]. Group 3: Valuation Concerns - Costco's stock is currently trading at over 50 times trailing earnings, which is considered expensive given its single-digit growth rate [5]. - The elevated price-to-earnings multiple may lead to a decline in stock price if the company fails to meet high expectations as growth rates normalize [6]. Group 4: Investment Outlook - For Costco to turn a $25,000 investment into $1 million over 25 years, it would require a market cap increase to $16.6 trillion, which is deemed unlikely [7]. - While Costco remains a solid stock for long-term holding, investors should manage their expectations regarding future gains [8].

Financial Performance - Net sales increased by 9% to $62,530 million in the second quarter of 2025, driven by comparable sales growth and sales from 23 new warehouses opened since the end of the second quarter of 2024[76]. - Net income for the second quarter was $1,788 million, or $4.02 per diluted share, compared to $1,743 million, or $3.92 per diluted share in 2024[76]. - Net sales for Q2 2025 were $62,530 million, up from $57,331 million in Q2 2024, with a gross margin of $6,786 million[84]. - Gross margin percentage increased to 10.85% in Q2 2025, up five basis points from the previous year[85]. - Interest expense decreased to $36 million in Q2 2025 from $41 million in Q2 2024, primarily due to repayment of Senior Notes[95]. Membership and Revenue - Membership fee revenue rose by 7% to $1,193 million, primarily due to new member sign-ups and membership fee increases[76]. - Membership fee revenue increased by 7% in Q2 2025 and 8% in the first half of 2025, driven by new member sign-ups and fee increases[82]. - Total paid members reached 78,400, an increase from 73,400 in the previous year[82]. Sales and Growth - Comparable sales increased by 7% in the second quarter and 6% in the first half of 2025, positively impacted by increased shopping frequency and a slightly higher average ticket[81]. - E-commerce sales grew by 21% in the second quarter and 17% in the first half of 2025[77]. - The company expects continued growth in membership and sales as it expands its warehouse base, although initial profitability may be lower for new locations[71]. Expenses and Margins - SG&A expenses as a percentage of net sales decreased by eight basis points, and by nine basis points excluding the impact of gasoline price deflation[76]. - SG&A expenses for Q2 2025 were $5,663 million, representing 9.06% of net sales, a decrease of eight basis points[92]. Cash Flow and Capital Expenditures - Net cash provided by operating activities was $6,008 million in the first half of 2025, compared to $5,382 million in the first half of 2024[100]. - Capital expenditures in the first half of 2025 totaled $2,401 million, with plans to spend approximately $5,000 million during fiscal 2025[105]. Dividends and Share Repurchase - A quarterly cash dividend of $1.16 per share was declared on January 23, 2025, and paid on February 21, 2025[108]. - The remaining amount available for share repurchase under the authorized program was $2,452 million at the end of Q2 2025[109]. Financial Risk and Commitments - The company maintains bank credit facilities with a borrowing capacity of $1,176 million as of February 16, 2025, with $680 million allocated to international operations[110]. - Outstanding commitments under letter of credit facilities totaled $198 million at the end of the second quarter of 2025, primarily consisting of standby letters of credit[111]. - The company has direct exposure to financial market risk from fluctuations in foreign-currency exchange rates and interest rates, with no material changes reported[114]. Currency Impact - Changes in foreign currencies negatively impacted net sales by approximately $1,244 million, or 217 basis points, primarily from Other International and Canadian operations[79]. - Lower gasoline prices negatively impacted net sales by $56 million in the second quarter, while the volume of gasoline sold increased approximately 1%[79].

Core Viewpoint - Costco's stock fell 6.1% following its second-quarter fiscal 2025 results, despite earnings being slightly below Wall Street estimates, indicating a surprising market reaction given Costco's historical stability [1][2]. Financial Performance - Adjusted sales increased by 8.6%, and e-commerce sales grew by 22.2%, showcasing strong performance despite external challenges [3]. - In fiscal 2024, Costco reported sales of $249.6 billion and operating income of $9.29 billion, with membership fees contributing $4.83 billion, highlighting the profitability of its membership model [9][10]. Market Position and Strategy - Costco operates 897 warehouses, with 617 located in the U.S. and Puerto Rico, and 150 in Canada and Mexico, providing geographical diversification but also exposing the company to tariff risks [3]. - The company emphasizes member trust and value, maintaining low prices and thin margins to justify membership fees, which has resulted in a 90% renewal rate among its 137 million cardholders [7][10]. Competitive Landscape - Costco's price-to-earnings (P/E) ratio has risen to 56.3, significantly higher than its historical medians and compared to competitors like Walmart and Target, indicating that the stock may be overvalued [14][15]. - Despite its strong market position, Costco's stock price growth has outpaced earnings growth, leading to concerns about valuation sustainability [13][14]. Dividend and Investment Considerations - The dividend yield is low at 0.5%, and even with special dividends, the total yield remains around 2%, which may not attract passive income investors [16][17]. - A more favorable investment case could emerge if Costco's valuation aligns closer to its historical median, but current levels are deemed too high for consideration [18].

Core Insights - Warren Buffett's history with Costco stock is not flawless despite the company's long-term success, which has seen a rise of over 14,000% since 1985 [1] - Charlie Munger, Buffett's late partner, had a more favorable relationship with Costco, being a board member and holding it in his personal portfolio [2] - Buffett acknowledged selling Costco stock in June 2020 as a mistake, especially as the stock has since gained over 200% [5] Group 1: Business Model and Performance - Costco's primary business model revolves around selling memberships, which are highly profitable compared to its low-margin merchandise sales [7] - The company enjoys a stable revenue stream from membership fees, leading to predictable financial performance [8] - Operating income increased from $5.4 billion in fiscal 2020 to $9.3 billion in fiscal 2024, reflecting a 71% growth over four years, or an annualized growth rate of 14% [11] Group 2: Current Investment Considerations - Costco's operating income growth has slowed to 12% in the first half of fiscal 2025, indicating potential challenges ahead [12] - The stock's price-to-earnings (P/E) ratio has risen from around 35 to approximately 57, suggesting elevated valuations compared to its historical performance [12] - Despite its strong business model, the combination of slowing growth and high valuations raises questions about the attractiveness of investing in Costco stock at present [13]

Core Viewpoint - The current market correction, particularly in the Nasdaq Composite, presents potential buying opportunities for long-term investors, especially in high-quality stocks like Costco, despite its current high valuation [2][4][5]. Company Overview - Costco operates as a club retailer, generating significant revenue from membership fees, which constitute over half of its gross income, allowing it to maintain low retail margins [6][7]. - The company has a strong customer retention strategy, evidenced by a membership renewal rate exceeding 90%, indicating effective customer satisfaction [7]. Financial Performance - In the fiscal second quarter of 2025, Costco reported a 9.1% increase in sales, with same-store sales also rising, alongside a 5.1% increase in traffic and a 3.2% rise in the average ticket size [8]. - Despite a strong operational performance, Costco's quarterly earnings fell slightly short of Wall Street's consensus estimates, leading to some investor disappointment [8]. Valuation Insights - Costco's stock is currently considered expensive, with its price-to-sales, price-to-earnings, and price-to-book ratios all above their five-year averages and near historical highs [3][4]. - If the market downturn continues, Costco's stock may reach more reasonable valuation levels, making it an attractive option for growth-oriented investors [5][9]. Investment Strategy - Investors are encouraged to prepare a wish list of stocks, including Costco, to capitalize on potential price drops during market corrections [2][10]. - A target for increased interest in Costco's stock would be if its average price-to-earnings ratio aligns with its five-year average of around 40 [11].

Costco Wholesale Dividend PaymentsDividend Yield0.50% Annual Dividend$4.64 Dividend Increase Track Record21 Years Annualized 3-Year Dividend Growth13.59% Dividend Payout Ratio27.09% Recent Dividend PaymentFeb. 21 COST Dividend HistoryCostco Wholesale NASDAQ: COST March 2025 price plunge allows investors to buy into this industry-leading membership club at a discount ahead of an expected special dividend payment. The company is still a few quarters away from being able to issue another special but is on trac ...

Core Viewpoint - Costco's recent earnings report showed strong revenue growth despite a slight earnings miss, indicating resilience in a challenging macroeconomic environment and presenting a potential buying opportunity for investors [1][2]. Group 1: Financial Performance - In Q2 of fiscal 2025, Costco's revenue increased by 9% year over year to $63.72 billion, surpassing analysts' expectations by $640 million [1]. - Net income rose by 3% to $1.79 billion, or $4.02 per share, although it fell short of the consensus forecast by $0.09, primarily due to higher merchandise costs [2]. Group 2: Comparable Store Sales - Adjusted comparable store sales (comps) grew by 10.6% in fiscal 2022, 5.2% in fiscal 2023, and 5.9% in fiscal 2024, with an additional rise of 8.1% in the first half of fiscal 2025 [3]. - The growth in comps suggests that Costco is well insulated from inflation, which typically drives consumers to bulk purchases [4]. Group 3: Membership Growth - The total number of Costco cardholders increased by 6.6% year over year to 140.6 million, indicating strong retention of pricing power [6][7]. - The gross margin expanded by five basis points to 10.85%, while the operating margin rose by 10 basis points to 3.63% during the quarter [7]. Group 4: Membership Renewal Rates - Worldwide renewal rates remained steady at 90.5%, with the U.S. and Canada renewal rate increasing by 10 basis points to 93% [8][9]. - High renewal rates suggest that memberships are sticky, providing a competitive edge against rivals like Walmart's Sam's Club and BJ's Wholesale Club [9]. Group 5: Expansion Strategy - Costco has consistently opened new warehouses, increasing the number from 838 in fiscal 2022 to 890 in fiscal 2024, and reaching 897 by the end of Q2 2025 [10][11]. - This ongoing expansion reflects Costco's confidence in its business model despite macroeconomic challenges [11]. Group 6: Valuation Justification - Analysts project Costco's revenue and earnings per share to grow at compound annual growth rates of 7% and 10%, respectively, from 2024 to 2027 [12]. - The company's robust business model supports its premium valuation, trading at 48 times next year's earnings [12][13].

Costco Wholesale Corporation (COST) continued with its decent comparable sales growth in February. The performance reflects Costco’s ability to attract value-conscious shoppers with its competitive pricing and high-quality offerings.Decoding COST’s February CompsCOST’s comparable sales for February illustrate its market strength. For the four weeks ended March 2, 2025, comparable sales in the United States and Canada grew 8.6% and 3.2%, respectively, while Other International markets saw a decrease of 0.6%. ...