Core Insights - Costco has generated a total return of 159% over the past five years, with net sales reaching $270 billion in fiscal 2025, although shares are currently 17% off their peak [1] Group 1: Membership Model - Costco's membership model is a key differentiator, requiring customers to pay an annual fee of $65 to shop at its warehouses, with 81 million membership households globally, reflecting a 6.3% year-over-year increase in Q4 2025 [3][4] - The high renewal rate of around 90% for memberships fosters customer loyalty and encourages repeat visits to warehouses [4] Group 2: Sales Performance - Same-store sales (SSS) increased by 5.9% in fiscal 2025, indicating consistent growth and strong operational stability [5][6] - The company's strategy of offering high-quality merchandise at competitive prices contributes to its ability to maintain steady demand across various economic conditions [6] Group 3: Valuation Concerns - Costco shares are considered expensive, trading at a price-to-earnings (P/E) ratio of 49.2, which raises concerns about potential returns if purchased at high valuations [8] - The elevated P/E ratio suggests that the market may consistently reward Costco with a premium valuation, but this leaves little margin for safety and could lead to future contraction as the company matures [9]

Costco's stock has stumbled even as its warehouse business continues to thrive.Costco stock has slipped back after a long stretch of outperformance. As of this writing, shares of Costco Wholesale (COST +0.30%) are trading below $900 again, putting the shares in the red for 2025.The wholesale club remains one of the strongest retailers in the market. Costco's membership model and private-label brands continue to pull in steady traffic and high renewal rates. The problem for investors is not the business -- i ...

Core Insights - Costco is not just a retailer but a phenomenon with a strong following in North America due to its unique business model and low prices [1] Membership Model - The membership model is Costco's secret weapon, with customers paying $65 for a basic membership or $130 for an executive membership, generating over $5.3 billion in revenue for the fiscal year ending August 31, 2025 [3] - Membership revenue covers about one-fifth of overhead expenses, allowing Costco to sell products at lower gross margins [4] - Costco's renewal rates exceed 90%, creating a loyalty flywheel that is difficult for competitors to replicate [6][7] Growth Strategy - Despite operating 890 warehouses globally, Costco plans to increase this number to 914 by the end of fiscal 2025 and to 944 by fiscal 2026, representing a disciplined growth strategy focused on high-return locations [8] Financial Performance - In the last fiscal year, Costco generated $275 billion in revenue (+8% year-over-year) and $8.1 billion in net income (+10% year-over-year), with a return on invested capital of over 20% [9]

Core Viewpoint - Costco Wholesale has historically outperformed the market but is currently experiencing a rare period of underperformance, remaining flat year-to-date while the market has risen by 14% [2] Group 1: Business Model and Performance - Costco's retail model is distinct and superior, charging annual membership fees that allow customers to access low prices, leading to high savings and increased sales volume [4][5] - In the fiscal fourth quarter of 2025, Costco reported an 8% year-over-year sales increase, with comparable sales up 5.7% and e-commerce sales rising by 13.6% [6] - Earnings per share increased from $5.29 to $5.87, and membership fees rose by 14%, with total members reaching 81 million, a 6.3% increase from the previous year [6] Group 2: Membership Insights - Executive members, who pay double the standard membership fee of $130, represent 47.7% of total paid members but account for 74.2% of sales [7] - Renewal rates for memberships were strong at 92.3% in the U.S. and Canada, and 89.8% globally [7] Group 3: Market Sentiment and Challenges - Despite strong performance metrics, the market has shown some negative sentiment due to slowing comparable sales growth and lower-than-usual global renewals [10] - Management attributes the decline in renewal rates to an increase in online signups, which tend to renew at slightly lower rates, but sees this as a net advantage for attracting younger members [10]

Core Insights - Costco Wholesale Corporation reported fourth-quarter fiscal 2025 results with revenues slightly below estimates but earnings exceeding expectations, driven by membership growth, increased traffic, e-commerce gains, and margin expansion [1][2][3] Financial Performance - Quarterly earnings were $5.87 per share, surpassing the Zacks Consensus Estimate of $5.81, and up from $5.15 in the prior year [2] - Total revenues reached $86,156 million, an 8.1% increase year over year, but fell short of the Zacks Consensus Estimate of $86,179 million [3] - Comparable sales rose 5.7% year over year, with U.S. comparable sales growing 5.1% and international markets seeing increases of 6.3% and 8.6% [3][6] Membership and Traffic Growth - Membership fees increased by 14% to $1,724 million, with total paid members reaching 81 million, a 6.3% increase from the previous year [5] - The membership renewal rate was 92.3% in the U.S. and Canada, and 89.8% worldwide [4][8] E-commerce and Margin Expansion - E-commerce comparable sales grew 13.6% year over year, with gross margin expanding by 13 basis points to 11.1% [7] - Operating income increased by 9.8% to $3,341 million, with operating margin improving by 10 basis points to 3.9% [7] Store Operations and Expansion Plans - Costco operates 914 warehouses globally, with plans to open 35 new warehouses in fiscal 2026 [8][9] - The company added 24 net new warehouses in fiscal 2025, including various international locations [9] Financial Health - As of the end of the quarter, Costco had cash and cash equivalents of $14,161 million and long-term debt of $5,713 million [10] - Capital expenditures for the quarter were approximately $1.97 billion, totaling just under $5.5 billion for the year [10]

Financial Data and Key Metrics Changes - Net sales for Q4 fiscal year 2025 reached $84.43 billion, an increase of 8% from $78.18 billion in the same quarter last year [12] - Net income for Q4 was $2.61 billion, or $5.87 per diluted share, up 11% from $2.35 billion, or $5.29 per diluted share in the previous year [12] - Membership fee income increased to $1.72 billion, a growth of 14% year over year [14] Business Line Data and Key Metrics Changes - E-commerce sales exceeded $19.6 billion, increasing over 15% [7] - Comparable sales were up 5.7%, or 6.4% adjusted for gas deflation and foreign exchange [12] - Gross margin for Q4 was reported at 11.13%, up 13 basis points year over year [17] Market Data and Key Metrics Changes - Traffic or shopping frequency increased by 3.7% worldwide [13] - The average transaction or ticket was up 1.9% worldwide, adjusted for gas deflation and FX [14] - The U.S. and Canada renewal rate was 92.3%, while the worldwide rate was 89.8% [15] Company Strategy and Development Direction - The company plans to open 35 new warehouses in fiscal year 2026, indicating continued expansion both domestically and internationally [5] - There is a focus on increasing Kirkland Signature product sourcing in the regions where items are sold to lower costs and reduce emissions [8] - The company aims to enhance member experience through improved checkout technology and digital enhancements [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in growing market share despite macroeconomic uncertainties [11] - The company is optimistic about the membership base growth, particularly among younger members [40] - Management noted that the membership renewal rate is expected to decline slightly due to a higher number of online sign-ups [41] Other Important Information - Capital expenditure for Q4 was approximately $1.97 billion, with a total of under $5.5 billion for the full year [20] - The company celebrated milestones such as the 40th anniversary of its $1.50 hot dog and soda combo [7] - Inflation remained in the low to mid-single digit range, with specific commodities experiencing varying inflation rates [25] Q&A Session Summary Question: Awareness of extended member hours and potential comp lift - Management indicated that communication about extended hours has been effective, with a 1% comp lift observed [32][33] Question: Membership renewal rate expectations - Management acknowledged that the renewal rate may continue to decline due to a higher number of online sign-ups but remains optimistic about overall membership growth [38][40] Question: Core margins and price increases - Management reported a 29 basis point increase in core margins, with improvements across all main categories [45][47] Question: Sustainability of membership fee income growth - Management expressed confidence in continued growth opportunities for membership income, driven by new warehouse openings and younger member engagement [56][57] Question: E-commerce and grocery demand - Management noted strong growth in Instacart-driven traffic and emphasized the importance of fresh foods in meeting online grocery demand [66][68]

Financial Data and Key Metrics Changes - Net sales for Q4 2025 reached $84.43 billion, an increase of 8% from $78.18 billion in Q4 2024 [10] - Net income for Q4 was $2.61 billion, or $5.87 per diluted share, up 11% from $2.35 billion, or $5.29 per diluted share in the same quarter last year [10] - Membership fee income increased to $1.72 billion, a 14% year-over-year growth [11] Business Line Data and Key Metrics Changes - E-commerce sales exceeded $19.6 billion, increasing over 15% year-over-year [5] - Comparable sales were up 5.7%, or 6.4% adjusted for gas deflation and foreign exchange [10] - Fresh sales were up high single digits, with double-digit growth in meat [20] Market Data and Key Metrics Changes - Traffic or shopping frequency increased by 3.7% worldwide [11] - The average transaction or ticket was up 1.9% worldwide, adjusted for gas deflation and FX [11] - Gas volumes saw positive low single digits, but gas comps were negative mid-to-high single digits due to lower average prices [22] Company Strategy and Development Direction - The company plans to open 35 new warehouses in fiscal year 2026, indicating continued expansion opportunities [4] - There is a focus on moving more Kirkland Signature product sourcing closer to the markets where they are sold to lower costs and reduce emissions [6] - The company is enhancing member experience through improved checkout technology and digital enhancements [7][25] Management's Comments on Operating Environment and Future Outlook - Management remains confident in the ability to grow market share despite macroeconomic uncertainties [9] - The company is focused on improving renewal rates for new online members through targeted digital communications [15][40] - Overall inflation remains in the low to mid-single digit range, with specific commodities experiencing varying inflation rates [22][75] Other Important Information - Capital expenditure in Q4 was approximately $1.97 billion, with a total of under $5.5 billion for the full year [18] - The company celebrated milestones such as the 40th anniversary of its hot dog and soda combo and the 30th anniversary of Kirkland Signature [5] - Digital e-commerce site traffic was up 27%, with strong sales in various categories [24] Q&A Session All Questions and Answers Question: Awareness of extended member hours and potential comp lift - Management communicated effectively about the extended hours, resulting in a 1% comp lift, with expectations for further growth as awareness increases [30][31] Question: Expected decline in membership renewal rates - Management anticipates a continued decline in renewal rates due to a higher number of online sign-ups, but overall membership engagement remains strong [34][39] Question: Insights on core margins and price increases - Core margins improved by 29 basis points year-over-year, with a focus on maintaining value while navigating tariffs [42][44] Question: Sustainability of warehouse growth pace - The company sees potential for continued growth in warehouse openings, with a focus on making informed decisions rather than hitting specific targets [68][70] Question: Impact of tariffs on gross margin - Management is closely monitoring the impact of tariffs and is prepared to adjust pricing strategies as necessary [80]

Core Viewpoint - Costco's same-store sales growth in the US is projected at approximately 6%, with global sales at about 6.5%, indicating strong performance but not sufficient for the company's elevated valuation [1][2] Sales Performance - There is a deceleration in sales growth from 8% last quarter, attributed to a mini investment cycle within Costco and elevated operating expenses, which were in double digits last quarter [2] - The grocery business remains strong, accounting for over 60% of domestic sales, with mid-single-digit growth, while non-food sales need to accelerate to support overall performance [7][8] Membership Insights - Costco's membership renewal rate is around 90%, indicating strong customer loyalty, but there is a need for more growth in membership income, which is expected to see low double-digit increases this quarter [4][5] - The introduction of younger consumers through digital channels has led to some churn in membership numbers, which is being monitored [5][6] Competitive Landscape - Walmart is highlighted as a top pick in the e-commerce space, outperforming Costco and the S&P with a year-to-date increase of 14% compared to Costco's 3% [9][10] - Walmart's growth is supported by its digital business and alternative revenue streams, with significant potential for earnings per share growth in the coming years [10]

Core Insights - Costco Wholesale has underperformed the broader market in 2025, with stock up mid-single digits compared to the S&P 500's low double digits increase [1] - The company operates on a membership model that combines low-margin retail sales with high-margin fee income, fostering strong customer loyalty [1] Financial Performance - Recent quarterly results show revenue growth of 8% year over year, with comparable sales increasing by 5.7% (8% excluding gasoline and foreign exchange impacts) [4] - E-commerce sales rose by 14.8% in the quarter, contributing positively to overall performance [4] - Operating income improved, and earnings per share increased to $4.28 from $3.78 a year ago, indicating effective sales growth and expense management [4] Membership Metrics - Membership fee income grew by 10% to approximately $1.24 billion, supported by high renewal rates and an increase in executive memberships [5] - Renewal rates remained above 92% in the U.S. and Canada, demonstrating continued member value perception [5] Consistency and Growth - Monthly updates reflect consistent growth, with fourth-quarter net sales up 8% and full-year fiscal 2025 net sales also up about 8% [6] - Comparable sales increased by 5.7% for the quarter and 5.9% for the year, with e-commerce growth at 13.6% for the quarter and mid-teens for the year [6] Valuation Considerations - Despite strong core business performance and rising membership fee income, the current valuation suggests that near-flawless execution is priced in, leaving little margin for error [7]

Core Viewpoint - Costco Wholesale Corporation is expected to report improved revenues and earnings for its fiscal third quarter, driven by an increase in comparable store sales and strong customer traffic [2][5]. Financial Performance Expectations - The Zacks Consensus Estimate for Costco's fiscal third-quarter revenues is $63.1 billion, reflecting a 7.9% year-over-year increase [5]. - The estimated earnings per share (EPS) for the fiscal third quarter is $4.25, indicating a 12.4% rise from the previous year [5]. - Comparable sales in the U.S. rose by 7.1% in April, surpassing estimates despite calendar-related issues [2]. Customer Traffic and Sales Growth - U.S. store traffic increased by 5%, while global traffic rose by 4.2%, with average transaction size growing by 2.4% year-over-year [3]. - E-commerce sales saw a significant growth of 13% in April compared to the same month last year [3]. Regional Performance Insights - Core sales in Canada and other international markets faced challenges due to price increases and macroeconomic pressures, but strong sales in the Southeast, Midwest, and Northeast U.S. regions helped offset these declines [4]. Membership Model and Customer Loyalty - Costco's membership model has proven successful, contributing to long-term growth prospects, with a current renewal rate of 93% [7][9]. - Recent increases in membership fees are expected to enhance profit margins and provide flexibility in managing costs [8]. Operational Efficiency - The company has improved its supply chain efficiency, increased item turnover, and simplified inventories, positioning itself as a top performer in the retail sector [10]. Trading Strategy Post-Earnings - The anticipated increase in comparable store sales suggests that upcoming quarterly results will be positive, likely leading to a rise in stock price [11]. - Technical indicators show Costco stock trading above both the short-term 50-day moving average and long-term 200-day moving average, indicating a bullish trend [12].