Shares of Costco Fall After Mixed Earnings and Warnings About Tariffs

Core Insights - Costco's shares fell 6.4% following mixed earnings results, with management discussing the impact of tariffs on the business and the retail sector [1] Financial Performance - Earnings per share for the second fiscal quarter of 2025 were reported at $4.02, missing Wall Street estimates by$0.09 [2] - Revenue reached $63.7 billion, surpassing estimates of$63.13 billion [2] Tariff Impact - Approximately one-third of Costco's U.S. sales are imported, with less than half of those products sourced from China, Mexico, and Canada [3] - Management emphasized that tariffs will affect the entire retail sector, but Costco is prepared to mitigate the impact through a reduced SKU model and strong supplier partnerships [4] Membership Fees - Costco raised annual membership fees for the first time since 2017, contributing about 3% to fee income in the second fiscal quarter, with most benefits expected over the next four quarters [5] Stock Valuation - Despite recent sell-offs, Costco's stock trades at 53 times forward earnings, indicating a significant rerating in 2024; however, the elevated valuation and ongoing tariff issues suggest caution in buying the stock [6]