PART I: FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for the period ended May 11, 2025, including income, balance sheets, equity, and cash flow statements Condensed Consolidated Statements of Income (in millions, except per share data) | | 12 Weeks Ended May 11, 2025 | 12 Weeks Ended May 12, 2024 | 36 Weeks Ended May 11, 2025 | 36 Weeks Ended May 12, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | $63,205 | $58,515 | $189,079 | $174,756 | | **Operating Income** | $2,530 | $2,197 | $7,042 | $6,243 | | **Net Income** | $1,903 | $1,681 | $5,489 | $5,013 | | **Diluted EPS** | $4.28 | $3.78 | $12.34 | $11.27 | Condensed Consolidated Balance Sheets (in millions) | | May 11, 2025 | September 1, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $38,151 | $34,246 | | **Total Assets** | $75,482 | $69,831 | | **Total Current Liabilities** | $37,579 | $35,464 | | **Total Liabilities** | $48,357 | $46,209 | | **Total Equity** | $27,125 | $23,622 | Condensed Consolidated Statements of Cash Flows (in millions) | | 36 Weeks Ended May 11, 2025 | 36 Weeks Ended May 12, 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $9,468 | $8,381 | | **Net cash used in investing activities** | $(3,343) | $(2,706) | | **Net cash used in financing activities** | $(2,182) | $(8,948) | | **Net change in cash and cash equivalents** | $3,930 | $(3,296) | - As of May 11, 2025, Costco operated **905** warehouses worldwide, with the majority (**624**) located in the United States. The company also operates e-commerce sites in **eight** countries[23](index=23&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's analysis highlights strong Q3 FY2025 performance with increased net sales, comparable sales, membership fee revenue, and improved gross margin, supported by robust liquidity - Key drivers of profitability are identified as increasing net sales, particularly comparable sales, which are influenced by shopping frequency and average ticket size. The company's **low-price, high-volume model** enables it to operate with **lower gross margins** than typical retailers[66](index=66&type=chunk)[68](index=68&type=chunk) - Highlights for Q3 2025 vs. Q3 2024 include: - Net sales increased **8%** to **$62.0 billion** - Membership fee revenue increased **10%** to **$1.24 billion** - Gross margin percentage increased by **41 basis points** - Net income increased to **$1.9 billion**, or **$4.28 per diluted share**[77](index=77&type=chunk) [Results of Operations](index=20&type=section&id=Results%20of%20Operations) Q3 2025 saw an 8% rise in net sales, driven by comparable sales growth and new openings, alongside a 10% increase in membership fees and improved gross margin, despite higher SG&A expenses Comparable Sales Growth (Q3 2025 vs Q3 2024) | Region | Reported Comp Sales | Comp Sales (ex-FX & Gas) | | :--- | :--- | :--- | | U.S. | 7% | 8% | | Canada | 3% | 8% | | Other International | 3% | 9% | | **Total Company** | **6%** | **8%** | - Membership fee revenue grew **10%** in Q3 2025 to **$1.24 billion**, driven by new member sign-ups and a fee increase effective September 1, 2024. Total paid members reached **79.6 million**, with a worldwide renewal rate of **90.2%**[84](index=84&type=chunk)[85](index=85&type=chunk) - Q3 gross margin percentage increased by **41 basis points** to **11.25%**. Excluding the **12 basis point** positive impact from gasoline price deflation, the margin increased by **29 basis points**, driven by improvements in core merchandise and ancillary businesses, partially offset by a LIFO charge[86](index=86&type=chunk)[87](index=87&type=chunk) - SG&A expenses as a percentage of net sales increased by **20 basis points** to **9.16%** in Q3. This was primarily due to investments in employee wages and a one-time expense for increased employee vacation[93](index=93&type=chunk)[94](index=94&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position, primarily from operating cash flow, funding significant capital expenditures and shareholder returns through dividends and share repurchases - Primary liquidity sources are cash from operations and existing cash balances. At May 11, 2025, cash, cash equivalents, and short-term investments totaled **$14.85 billion**[100](index=100&type=chunk) - The company plans to spend over **$5.0 billion** on capital expenditures in fiscal 2025. It opened **17** new warehouses in the first 36 weeks and plans **10** more for the remainder of the fiscal year[106](index=106&type=chunk) - During the first 36 weeks of fiscal 2025, the company repurchased **658,000** shares for approximately **$623 million**. The remaining authorization under the share repurchase program was **$2.24 billion**[109](index=109&type=chunk) [Market Risk Disclosures](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk exposure, primarily from foreign currency and interest rate fluctuations, remains consistent with prior disclosures, with no material changes reported - There have been no material changes to the company's market risks related to foreign-currency exchange rates and interest rates as disclosed in the most recent Form 10-K[114](index=114&type=chunk) [Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of May 11, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of May 11, 2025[116](index=116&type=chunk) - No material changes to the company's internal control over financial reporting occurred during the third quarter of fiscal 2025[117](index=117&type=chunk) PART II: OTHER INFORMATION [Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, including class actions and a government investigation, but management anticipates no material adverse effect on its financial position - The company is defending against several legal actions, including employee class actions, opioid litigation, and privacy-related lawsuits concerning website trackers[51](index=51&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk) - The U.S. Attorney's Office is conducting a False Claims Act investigation related to prescription medications[57](index=57&type=chunk) - The company does not believe that any pending litigation, individually or in aggregate, will have a material adverse effect on its financial position, results of operations, or cash flows[60](index=60&type=chunk) [Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred in the company's risk factors since the last Annual Report on Form 10-K - No material changes have occurred in the company's risk factors since the last Annual Report on Form 10-K[120](index=120&type=chunk) [Share Repurchases](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased common stock during Q3 FY2025, with a significant remaining authorization under its share repurchase program Common Stock Repurchase Activity (Q3 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | Total Cost (in millions) | | :--- | :--- | :--- | :--- | | Feb 17 - Mar 16, 2025 | 68,000 | $1,025.03 | $70 | | Mar 17 - Apr 13, 2025 | 76,000 | $922.61 | $70 | | Apr 14 - May 11, 2025 | 71,000 | $988.05 | $70 | | **Total Q3** | **215,000** | **$976.71** | **$210** | - The share repurchase program is conducted under a **$4.0 billion** authorization approved in January 2023, which expires in January 2027. As of the end of Q3 2025, **$2.242 billion** remained available[121](index=121&type=chunk)

Core Insights - Costco is testing a new checkout technology called "Scan & Go" to enhance the checkout experience for its members, addressing a significant concern among customers [1][10] - CEO Ron Vachris reported positive early results from the tests, indicating strong member adoption and satisfaction [2][7] - The company aims to improve the member experience further by exploring additional technology pilots for faster checkout processes [7][10] Checkout Technology - The "Scan & Go" technology allows customers to scan items as they shop and pay through an app, similar to offerings from competitors like Sam's Club and BJ's Wholesale [4][5] - Traditional checkout lanes and some self-checkout options are still available at all Costco locations [3][11] - The technology has reportedly been successful in expediting transactions and reducing wait times for customers [1][9] Competitive Landscape - Competitors such as Sam's Club and BJ's Wholesale have implemented similar technologies, with Sam's Club offering a "Scan & Go" option and BJ's providing "ExpressPay" for quicker checkouts [4][5] - The competitive pressure from these retailers highlights the importance of Costco's initiative to adopt new technologies to retain and attract members [2][4]

Company and Industry Summary Company Overview - The company reported net sales of **$20.97 billion** for the month, representing an increase of **6.8%** from **$19.64 billion** in the same period last year [3] Sales Performance - Comparable sales results for the month were as follows: - **U.S.**: **4.1%** - **Canada**: **3.3%** - **Other International**: **6.6%** - **Total Company**: **4.3%** - **E-commerce**: **11.6%** [3] - When excluding impacts from changes in gasoline prices and foreign exchange, comparable sales were: - **U.S.**: **5.5%** - **Canada**: **6.3%** - **Other International**: **8.4%** - **Total Company**: **6%** - **E-commerce**: **12%** [4] Traffic and Transaction Insights - Comparable traffic or frequency increased by **3.4%** worldwide and **2.8%** in the U.S. [4] - The average worldwide selling price per gallon of gas decreased by approximately **10.4%** year-over-year [5] - Average transaction value increased by **0.9%**, and when excluding gas deflation and foreign exchange, it was up **2.5%** [5] Regional Performance - Strongest comparable sales in the U.S. were observed in the **Northwest**, **Midwest**, and **Los Angeles** regions [6] - Internationally, the best results were in **Mexico**, **Taiwan**, and **Korea** [6] Merchandising Highlights - Foods and sundries showed positive mid to high single-digit growth, with strong performance in: - **Cooler** - **Candy** - **Frozen Foods** - Fresh foods increased by high single digits, particularly in: - **Meat** - **Bakery** - Non-foods also performed well with mid single-digit growth, especially in: - **Jewelry** - **Majors** - **Gift Cards** - Ancillary business sales declined by low to mid single digits, while pharmacy, optical, and hearing aid departments were top performers [7][8] Challenges and Risks - The negative impact of foreign currencies on total and comparable sales was approximately: - **Canada**: **-1.6%** - **Other International**: **-1.0%** - **Total Company**: **-0.4%** [5] - Gas price deflation negatively impacted total reported comparable sales by approximately **-1.3%** [5] - The negative impact of cannibalization was approximately **-70 basis points** for the company in May [6] Future Outlook - The upcoming June reporting period will include five weeks, starting from June 2 and ending July 6, compared to the previous year's five weeks from June 3 to July 7 [8]

Core Insights - Costco Wholesale Corporation reported strong third-quarter fiscal 2025 results, leading to discussions among investors regarding the stock's future direction [2] - The company's strategic initiatives and operational efficiencies have contributed to a positive market response, with shares rising 4.6% post-earnings release [3] Financial Performance - Costco's top and bottom lines exceeded the Zacks Consensus Estimate, with comparable sales growth of 8% excluding gasoline prices and foreign exchange impacts [4] - In the U.S., comparable sales increased by 7.9%, while Canada and Other International markets saw gains of 7.8% and 8.5%, respectively [4] Membership Growth - The company ended the quarter with 79.6 million paid household members, a 6.8% increase year over year, with executive memberships growing by 9% to 37.6 million [5] - Executive members now account for 47.3% of all paid members and drive 73.1% of worldwide sales [5] Analyst Estimates - Analysts have raised their estimates for the current fiscal year by 6 cents to $18.02 and for the next fiscal year by 14 cents to $19.90, indicating expected year-over-year growth rates of 11.9% and 10.4%, respectively [6] Membership Revenue - Membership fee income rose 10.4% year over year to $1,240 million in Q3, with a recent membership fee increase contributing about 4.6% to this income [9] Digital Expansion - E-commerce comparable sales increased by 14.8% in Q3, with Costco Logistics seeing a 31% rise in items delivered [12] - The company is also investing in digital transformation initiatives, including a Buy Now, Pay Later program in partnership with Affirm [12] Competitive Landscape - Costco's sales figures are part of a broader retail environment with increasing competition from companies like Ross Stores, Dollar General, and Target [13] Valuation - Costco stock has outperformed the industry, rallying 26.4% over the past year compared to the industry's 13.8% gain [15] - The stock is trading at a forward 12-month price-to-earnings ratio of 54.42, significantly higher than the industry average of 34.39 and the S&P 500's 21.82 [16]

Core Viewpoint - Costco Wholesale has demonstrated significant stock performance with a 600% increase over the past decade, but future growth may not justify its current high valuation [1][2][8] Business Model - Costco operates a membership warehouse model, selling items in bulk at low margins while generating most profits from membership fees [4] - The company has built strong brand power, allowing it to attract customers without spending on marketing [5] Recent Performance - In the latest quarter, Costco reported an 8% increase in net sales and a 5.8% increase in comparable-store traffic year-over-year [6][7] - Paid memberships rose by 6.8%, indicating a robust customer base despite concerns about consumer spending [7] Valuation Concerns - The stock's price-to-earnings (P/E) ratio has increased from a range of 25-35 pre-pandemic to nearly 60 today, suggesting a disconnect between stock price and earnings growth [8][10] - Analysts project long-term earnings growth of 9% to 10% annually, which may not be sufficient to support the current high valuation [10][11] Future Projections - If Costco's earnings grow at a 10% annualized rate, projected earnings per share for fiscal years 2026 to 2030 would be $19.80, $21.78, $23.96, $26.35, and $28.99 respectively [12][15] - Applying a historical P/E of 30 to the projected earnings could suggest a share price of $870 by 2030, while the current trading price is $1,040, indicating potential overvaluation [13][14]

Core Insights - Costco's FQ3 earnings report shows an 8.0% adjusted increase in comparable sales, indicating solid performance despite initial market skepticism [1][3] - The company is expected to reach new stock price highs by 2025, driven by strong cash flow and capital returns [2] Group 1: Financial Performance - Revenue grew by 8% year-over-year, surpassing consensus estimates and outperforming competitors in the retail sector [3] - U.S. comparable-store sales increased by 7.9%, while Canadian sales rose by 7.8% and Other International sales grew by 5.5% [3] - Net income increased nearly 13% to $1.9 billion, with expectations of continued strength as the year progresses [4] Group 2: Strategic Outlook - Costco plans to invest in digital and warehouse expansions, with digital sales growing by 15.7% [4][5] - The company is adjusting its supply chain to focus on localized products affected by tariffs [5] - Investments in e-commerce and warehouse automation are underway, including a buy-now-pay-later feature for members [6] Group 3: Dividend and Cash Flow - Costco has a strong history of special dividends, with cash flow increasing by 40% to $13.836 billion, potentially exceeding $15 billion by year-end [8] - The last special dividend was $15 per share, and future payments may be larger if delayed [9] Group 4: Analyst Sentiment - Analysts maintain a Moderate Buy rating, with a 12-month price target of $1,035.32, indicating a potential upside of over 10% [10][11] - Institutional investors own nearly 70% of Costco stock, providing additional support for the company's long-term trajectory [11][12] Group 5: Market Trends - Costco's stock chart appears bullish, remaining in an uptrend despite a 1% pullback after the Q3 release [13] - Key resistance levels are identified near $1,050 and $1,075, which, if surpassed, could lead to new highs [13][14]

Core Insights - Costco Wholesale operates 905 locations, with 624 in the U.S., generating nearly $62 billion in net sales in Q3 2025, averaging around $68 million in quarterly net sales per location, indicating strong performance in physical retail [1][2] - Despite substantial sales, Costco's same-store sales growth was less than 6% in Q3, reflecting the challenges of growth at a larger scale [4] - The company has significant growth potential in its e-commerce segment, with net sales growth of nearly 15% in Q3 and over 16% for the first three quarters of fiscal 2025, outpacing overall business growth [6] E-commerce and Digital Growth - Costco's partnership with Affirm aims to enhance digital transactions through buy now, pay later options, which can drive e-commerce sales [7] - The growth of Costco's digital business is expected to improve profit margins, as the company can track customer purchases effectively through membership accounts [8] - Advertising revenue generated from personalized marketing efforts allows Costco to maintain low prices for its members, reinforcing its low-price leadership strategy [10] Membership and Retention - Costco's membership retention rate was close to 93% in Q3, indicating strong customer loyalty, which is crucial for its business model [12] - Membership growth was only 7% in Q3, but an increase in membership prices led to a more than 10% year-over-year increase in membership income, contributing significantly to overall profits [13] - The company's ability to keep prices low while growing its digital efforts supports its membership-based business model, which is vital for long-term investment success [14]

全球折扣零售王者——Costco 于北京时间 5 月 30 日美股盘后，发布了截至月份的 2025 财年 3 季度财报。如往常一致，本季 Costco 的表现仍是波澜不惊的平稳， 具体来看： 1、同店增长依然稳健：Costco 本季度整体同店名义销售增速为 5.7% ，相比上季度显著放缓了 1.1pct。但实际 主要是受油价和汇率影响的拖累，剔除这些因素后 同店增速仍达 7.9%， 表现并不差。 价量驱动上， 同店客流量本季增长 5.2%，只是略有放缓。但受汇率等的拖累，平均客单价同比增速本季明显下滑到 0.4% ，是名义同店销售增长走弱的主要原 因。 2、海外地区增长并不差：加拿大和其他国际地区 3% 上下的名义增速明显跑输美国本土 6.6% 的同比。 海外看似疲软，但 实际也只是受油价和汇率的扰动。 剔除这部分因素 ，加拿大和其他国际地区的同店销售增速都在 8% 上下，和美国地区是基本一致的。 可见， Costco 实际在全球范围内的经营表现都相当稳健。 3、会员费收入：本季为$12.4 亿，比预期稍低了 0.1 亿。不过趋势上，同比增长 10.4%，是 4Q23 以来最高的。属于趋势向好，但没市场预期的 ...

Core Viewpoint - Costco Wholesale continues to demonstrate strong performance in the retail sector, achieving significant revenue and earnings growth despite tariff challenges [1][3]. Financial Performance - Quarterly revenue increased by 8% to $63.21 billion, with adjusted earnings per share (EPS) rising 13% to $4.28, surpassing analyst expectations [5]. - Same-store sales rose 8% when adjusted for gasoline prices and foreign currency, with U.S. same-store sales up 7.9% and Canadian comparable-store sales climbing 7.8% [6]. - E-commerce revenue grew by 15.7% on an adjusted basis, indicating strong online sales performance [6]. Customer Experience Initiatives - The company is investing in technology to enhance the checkout process and has extended gas-station hours [4]. - A "buy now, pay later" program for big-ticket items has been introduced, showing initial promise [4]. Membership Growth - Membership-fee revenue increased by 10.4% to $1.24 billion, benefiting from a fee hike implemented in September [8]. - Memberships rose by 6.8% to 79.6 million paid households, with higher-cost executive memberships increasing by 9% [8]. Market Position - Costco's same-store sales growth outperformed competitors, with Target reporting a decline of 3.8% and Walmart achieving 4.5% growth [11]. - The company continues to gain market share as consumers are attracted to the value offered by warehouse stores [11]. Expansion Plans - Costco opened eight new locations in the quarter, bringing the total to 905 warehouse stores, with plans to open nine more in the upcoming quarter [10]. - Approximately 80% of new openings will be in high-traffic markets, which may cannibalize some existing store sales but will help alleviate congestion [10]. Valuation Insights - The stock trades at a forward price-to-earnings (P/E) ratio of 57.5, reflecting a premium valuation that has expanded significantly in recent years [12]. - Despite concerns over high valuation relative to revenue growth, the stock's momentum remains strong [15].

Group 1 - The article emphasizes the importance of delivering alpha-generating investment ideas through a structured and evidence-based approach [1] - The investment strategy involves a generalist approach, analyzing various sectors with perceived alpha potential compared to the S&P 500 [1] - Typical holding periods for investments range from a few quarters to multiple years, indicating a long-term investment perspective [1] Group 2 - The analyst has no current positions in the mentioned companies but may initiate a long position in Costco (COST) within the next 72 hours [2] - The article reflects the author's personal opinions and is not influenced by any compensation from companies mentioned [2] - There is no business relationship between the author and the companies discussed, ensuring an independent viewpoint [2]