Costco Wholesale (NasdaqGS:COST) 2025 Update Summary Company Overview - **Company**: Costco Wholesale - **Date of Call**: January 07, 2026 - **Period Covered**: Five-week retail month of December 2025 Key Financial Metrics - **Net Sales**: $29.86 billion, an increase of 8.5% from $27.52 billion last year [2] - **Comparable Sales**: - **US**: 6.0% - **Canada**: 8.4% - **Other International**: 10.6% - **Total Company**: 7.0% - **Digitally Enabled**: 18.9% [2] - **Comparable Sales Excluding Gas and FX**: - **US**: 6.3% - **Canada**: 6.0% - **Other International**: 5.6% - **Total Company**: 6.2% - **Digitally Enabled**: 18.3% [2] - **Traffic Growth**: Up 2.7% worldwide and 2.4% in the US [2] Impact of External Factors - **Foreign Currency Impact**: - Canada: Positive impact of approximately 3.5% - Other International: Positive impact of approximately 5.4% - Total Company: Positive impact of approximately 1.2% [3] - **Gas Price Deflation**: Negatively impacted total reported comparable sales by approximately 40 basis points; average worldwide selling price per gallon down 4.4% [3] Regional Performance - **Strongest US Regions**: Midwest, Northwest, and Southeast [3] - **Strongest International Markets**: Australia, Japan, and Korea [3] Merchandising Highlights - **Food and Sundries**: Positive mid-single digits - **Fresh Foods**: Up high single digits, with strong performance in bakery and meat [4] - **Non-Foods**: Positive mid-single digits, with strong performance in jewelry, tires, small appliances, and majors [4] - **Ancillary Business Sales**: Up mid-single digits, with pharmacy, food court, and optical as top performers [4] - **Gas Sales**: Down low single digits due to price per gallon changes year over year [4] Forward-Looking Statements - The company provided forward-looking statements that involve risks and uncertainties, which may cause actual results to differ from those indicated [1]

Core Insights - Costco Wholesale Corporation (COST) shares were trading at approximately $705 in April 2024, with a buy rating and a price target of $848. By February 2025, the stock had risen over 52% to $1,078 [1]. Company Analysis - The company has demonstrated significant stock price appreciation, indicating strong market performance and investor confidence [1]. - The analyst's background in healthcare and financial analysis provides a unique perspective on identifying companies with growth potential and stable profits [1]. Investment Focus - The current focus is on identifying long-term stock investments, suggesting a strategic approach to investment opportunities [1].

Core Viewpoint - Costco Wholesale Corporation's stock has shown significant growth, increasing over 52% from $705 in April 2024 to $1,078 by February 2025, indicating strong market performance and investor confidence [1]. Company Analysis - The stock was rated as a buy with a price target of $848 in April 2024, reflecting positive expectations for its future performance [1]. - The increase in stock price suggests that Costco has maintained stable profits and growth potential, making it an attractive long-term investment opportunity [1]. Analyst Background - The analyst has a unique perspective due to a background in healthcare combined with financial analysis skills, which aids in identifying companies with growth potential [1]. - Currently pursuing the CFA charter, the analyst focuses on long-term stock investments and provides in-depth analysis on various companies [1].

Group 1 - Costco Wholesale Corporation's shares experienced a decline of 2.12% over the past month [1] - The company also faced a loss of 4.77% in the month prior [1]

Core Viewpoint - Costco Wholesale has demonstrated strong business growth, but its stock price valuation raises concerns about whether it is justified given its current earnings multiple [1][10]. Business Performance - In the first quarter of fiscal 2026, Costco's total sales increased by 8.2% year over year to approximately $66 billion, with comparable sales rising by 6.4% and digitally enabled comparable sales increasing by 20.5% [4]. - The growth in comparable sales was attributed to both increased customer traffic and higher average transaction sizes [4]. - Costco's "other international" markets, excluding the U.S. and Canada, showed faster comparable sales growth, with a 6.8% increase in fiscal Q1 compared to 5.9% in the U.S. [5]. - For fiscal 2025, total sales rose by 8.1% year over year to about $270 billion [6]. Membership Growth - Membership fee income rose by 14% year over year to approximately $1.33 billion in the first quarter, outpacing sales growth [8]. - A membership price increase in September contributed to nearly half of the membership income growth, while the membership base also expanded, with paid executive memberships increasing by 9.1% to 39.7 million and total paid members rising by 5.2% to 81.4 million [9]. Valuation Concerns - Costco's price-to-earnings ratio stands at 47, with a forward price-to-earnings ratio of 42, which may be considered too high for the current market [10]. - The high valuation introduces risks, as shares could revert to a lower valuation despite strong business execution [10][11]. - Costco's valuation is currently higher than that of major tech companies like Nvidia and Amazon, which raises questions about its sustainability [11]. Competitive Landscape - The competitive environment is intensifying, particularly from e-commerce players like Amazon and brick-and-mortar competitors such as Walmart's Sam's Club and grocery chains like Kroger and BJ's Wholesale [12].

Core Viewpoint - The retailer's current issues are deemed temporary and attributed to excessive consumer demand according to an analyst [1] Group 1 - The problems faced by the retailer are not indicative of long-term challenges but rather a short-term phenomenon [1] - An analyst suggests that the situation reflects a mismatch between supply and heightened consumer demand [1]

Core Insights - Hyundai Motor Group plans to deploy humanoid robots at its U.S. manufacturing plant in Georgia starting in 2028, aiming to automate higher-risk and repetitive manufacturing tasks [1] Group 1: Company Strategy - The introduction of humanoid robots is part of Hyundai's broader strategy to enhance automation in manufacturing processes [1] - This initiative reflects the company's commitment to improving efficiency and safety in its production lines [1] Group 2: Industry Impact - The deployment of humanoid robots could set a precedent in the automotive industry, potentially influencing other manufacturers to adopt similar technologies [1] - This move aligns with the growing trend of automation in manufacturing, which is expected to reshape labor dynamics and operational practices within the industry [1]

Core Insights - Costco's digital ecosystem is a primary growth driver, with a 20.5% increase in digitally enabled comparable sales for Q1 FY26, significantly outpacing the overall comparable sales growth of 6.4% [1][9] - Key contributors to online sales growth include a 24% rise in e-commerce site traffic and a 13% increase in average order value [1][9] Digital Engagement and Personalization - The company is enhancing shopping experiences through improved product display pages and personalization capabilities, leading to higher conversion rates [2] - Same-day delivery services via Instacart, Uber Eats, and DoorDash have seen strong member adoption, contributing to sales growth [3] Integration of Digital Tools - Costco is integrating digital tools in warehouses, such as the Costco Digital Wallet and pre-scanning technology, which have increased checkout speeds by up to 20% [4] - AI is being utilized to optimize pharmacy inventory and gas station management, improving in-stock levels to over 98% and supporting mid-teen growth in pharmacy scripts filled [4] Competitive Landscape - Walmart reported a 27% global e-commerce growth in Q3 FY26, with 35% of digital orders delivered in under three hours, indicating a strong focus on convenience and digital innovation [6] - BJ's Wholesale Club reported a 30% growth in digitally enabled comparable sales in Q3 FY25, emphasizing the value of digitally engaged members [7] Financial Metrics - Costco's stock has declined 7.4% over the past year, while the industry has grown by 4% [8] - The forward 12-month price-to-earnings ratio for Costco is 41.21, higher than the industry average of 29.45 [10] - Zacks Consensus Estimates indicate year-over-year growth of 7.5% in sales and 11.7% in earnings per share for the current financial year [11]

Market Predictions for 2026 - The S&P 500 is expected to deliver single-digit gains in 2026, ending a streak of double-digit gains over the past three years, but no major market sell-off is anticipated due to strong economic and corporate earnings [4][5] - Small- and mid-cap stocks are predicted to outperform larger stocks, with Mirum Pharmaceuticals highlighted as a potential winner after its share price nearly doubled in 2025, and expected positive results from clinical studies in 2026 [6][7][8] - The AI sector is expected to shift from hype to tangible returns, with Alphabet predicted to continue benefiting from its Google Cloud unit and agentic AI technology, which is anticipated to drive growth [9][10][12] - The renewable energy sector is expected to continue its rebound, driven by strong AI growth and increased demand for energy to power data centers, with Brookfield Renewable and Clearway Energy expected to perform well [13][15] - Political dynamics in the mid-term election year are expected to create volatility in the stock market, but once the uncertainty fades, stocks are predicted to move higher, with potential winners in the cannabis industry if Democrats gain control [16][18]

Core Viewpoint - Telsey Advisory Group maintains an Outperform rating and a price target of $1,100 for Costco Wholesale ahead of the December sales report [1] Sales Forecast - Costco is expected to release December sales results after market close on January 7, with total comparable sales growth projected at 2.2% for December 2025, a decrease from 7.4% in the previous year [2] - Core merchandise comparable sales growth is forecasted at 2.0%, down from 9.9% a year earlier, excluding an estimated net benefit of approximately 20 basis points from gasoline prices and foreign exchange [2] Regional Performance - U.S. comparable sales excluding gas are expected to rise by 1.0%, compared to 9.8% last year [3] - Canada’s comparable sales excluding gas and foreign exchange are projected at 4.0%, down from 10.3% [3] - Other international markets are expected to post comparable sales of 5.0% excluding foreign exchange, compared to 9.8% in the prior year [3] External Factors - Gasoline prices declined in the low single-digit range during December, creating a roughly 20 basis point headwind to comparable sales [4] - A weaker U.S. dollar is expected to provide an estimated 40 basis point tailwind based on recent currency trends [4] Traffic and Ticket Growth - Traffic growth is projected at 0.5%, down from 5.5% last year, as consumers continue to seek value [5] - Average ticket growth is expected to be 1.7%, roughly in line with the prior year, supported by tariff-related inflation and positive category trends [5] Digital Sales - Digital sales are forecasted to increase by 5.0%, compared to 34.4% last year, reflecting gains in non-food categories and ongoing benefits from assortment expansion and targeted marketing [6] - Non-food sales are expected to benefit from holiday and gift-driven demand, while Food & Sundries and Fresh Foods are anticipated to remain solid due to at-home consumption trends and Costco's value-focused assortment [6]