Why Last Week's Costco Earnings Have Me Excited

Core Viewpoint - Costco reported strong earnings and revenue results, demonstrating its pricing power and resilience in a challenging economic environment, making it a favorable investment option [1][11][12] Financial Performance - For the 16-week quarter, Costco achieved net sales of $84.43 billion, an 8% increase year-over-year, and total revenue of $86.16 billion, surpassing estimates [2] - The net income for the quarter was $2.61 billion, translating to $5.87 in earnings per diluted share, exceeding expectations of $5.80 per share [2] - For the full fiscal year 2025, Costco's net sales reached approximately $269.9 billion, up from $249.6 billion in the previous year, with diluted EPS rising to $18.21 from $16.56 [3] Sales Trends - Comparable sales for Q4 showed strong performance, with adjusted U.S. sales increasing by 6%, Canada by 8.3%, and international sales by 7.2%, leading to an overall increase of 6.4% for the quarter [4] - E-commerce sales saw a significant rise, with adjusted comp sales increasing by 16.1% over the 52-week period [5] Membership and Cash Flow - Membership fees increased by 14% to $1.72 billion in Q4, highlighting the strength of Costco's membership model [5] - The company maintained robust free cash flow, with operating cash inflows of $13.34 billion and total cash/equivalents rising to $14.16 billion from $9.9 billion the previous year [6] Market Position and Consumer Behavior - Despite economic headwinds such as inflation and consumer spending cuts, Costco's commitment to low prices on essential goods has attracted more customers [7] - The company is strategically reinvesting a portion of its fee increases to enhance pricing competitiveness, benefiting both members and shareholders [7] Long-term Outlook - Although comparable sales growth has slowed in recent quarters, Costco's ability to grow in e-commerce and maintain a strong capital position suggests it remains a solid long-term investment [11] - The modest headline beat in earnings reflects Costco's defensive strength and potential for upside, reinforcing its value as a portfolio asset [12]