Core Viewpoint - Costco Wholesale Corp has experienced a significant stock price decline of nearly 15% from its peak, primarily due to a broader market sell-off and a slight earnings miss, despite strong revenue growth [1][5][6] Group 1: Stock Performance and Forecast - The current stock price of Costco is $903.92, with a 12-month price forecast averaging $1,030.43, indicating a potential upside of 14% [1] - Analysts have set a high forecast of $1,175.00 and a low forecast of $890.00 for Costco's stock [1] - The stock has been on a rally since late 2022, reaching an all-time high in February before the recent decline [1][5] Group 2: Earnings Report Analysis - Costco's latest earnings report showed a revenue increase of 9% year-over-year, reaching a new record, but earnings per share (EPS) fell short of expectations at $4.02 compared to the anticipated $4.11 [4][5] - The earnings miss, while not massive, contributed to the stock's decline amid a broader market downturn, with the S&P 500 down nearly 10% [5][6] Group 3: Analyst Sentiment and Technical Indicators - Despite the recent sell-off, many analysts maintain a bullish outlook on Costco, with several firms reaffirming Buy ratings and increasing price targets, such as Evercore ISI raising its target to $1,070 [7][8] - Technical indicators suggest that Costco is currently in oversold territory, with an RSI of 30, indicating a potential for a rebound [10] - The stock is trading near a long-term support line, suggesting that a bottom could be forming, which may attract buyers [11] Group 4: Investment Opportunity - The recent pullback in Costco's stock may present a compelling buying opportunity for long-term investors, as analysts believe the reaction to the earnings miss has been overdone [3][12] - The combination of strong revenue growth and a defensive business model positions Costco well to navigate market volatility [9][12]

Core Viewpoint - Costco Wholesale is a well-established retailer with strong growth potential, particularly in international markets, but its high valuation may limit future returns [2][4][5]. Group 1: Company Performance - Costco has consistently demonstrated robust growth, achieving nearly double-digit growth rates over the past decade, even during challenging economic conditions such as the pandemic and inflation [2][3]. - The company has seen its stock price increase by 520% over the last 10 years, indicating strong investor confidence and performance [4]. Group 2: Market Presence - The majority of Costco's warehouses, 767 out of 897, are located in North America, with significant room for expansion in international markets, particularly in China where it currently operates only seven warehouses [3]. - The long-term growth opportunities in international markets position Costco as a potential top growth stock for the future [3]. Group 3: Valuation Concerns - Costco's stock is currently trading at over 50 times trailing earnings, which is considered expensive given its single-digit growth rate [5]. - The elevated price-to-earnings multiple may lead to a decline in stock price if the company fails to meet high expectations as growth rates normalize [6]. Group 4: Investment Outlook - For Costco to turn a $25,000 investment into $1 million over 25 years, it would require a market cap increase to $16.6 trillion, which is deemed unlikely [7]. - While Costco remains a solid stock for long-term holding, investors should manage their expectations regarding future gains [8].

| Costco quarterly results wrap | | | | | | | | | | | | | | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | $ '00 mn | 1023 | 2024 | 3024 | 4024 | 1025 | 2025 | 2025E | 2023 | 3025 | 4023 | 1024 | Var. | Total revenue | 544 | ਦੇ ਫੇ ਤੇ | ਦੇਤ ਦ | 789 | 578 | ਦੇ8 4 | રે 8 ટ | 797 | 622 | 637 | ୧30 | 1.1% | | 8.196 | ર રેત્રેસ | 2.0% | ਰੇਂ ਦੇ ਦੇ | 6.2% | 5.7% | 9.1% | 1.0% | 7. ...

About this content About Emily Jarvie Emily began her career as a political journalist for Australian Community Media in Hobart, Tasmania. After she relocated to Toronto, Canada, she reported on business, legal, and scientific developments in the emerging psychedelics sector before joining Proactive in 2022. She brings a strong journalism background with her work featured in newspapers, magazines, and digital publications across Australia, Europe, and North America, including The Examiner, The Advocate, ...

Costco Wholesale (NASDAQ: COST ) (TSX: COST:CA ) just reported its Fiscal Q2-2025 earnings results, and the results looked good overall -- no surprise there. EPS slightly missed expectations, but revenue beat expectations slightly. The stock fell by 1.2% in the after-hours session after theI objectively search for undervalued stocks of any size across a wide variety of industries using quantitative methods that I've thoroughly backtested for success. I believe the numbers are more important than the story ( ...

Financial Data and Key Metrics Changes - Net income for Q2 2025 was $1.788 billion or $4.02 per diluted share, up from $1.743 billion or $3.92 per diluted share in the same quarter last year, representing an 8.4% growth when excluding a prior year tax benefit [17][18] - Operating income increased by 12.3% year-over-year, while net sales rose to $62.53 billion, a 9.1% increase from $57.33 billion [21][18] - Membership fee income grew by $82 million or 7.4% year-over-year, with a 9.4% increase when excluding foreign exchange impacts [25][26] Business Line Data and Key Metrics Changes - US comparable sales increased by 8.3%, while Canada comp sales rose by 4.6% and other international comp sales were up by 1.7% [21] - E-commerce comp sales surged by 20.9%, indicating strong growth in online sales [22] - Traffic increased by 5.7% worldwide and 5.6% in the US, with average transaction value up by 1% globally [23] Market Data and Key Metrics Changes - Foreign exchange negatively impacted sales by approximately 2.1%, while gas price deflation had a minor impact of about 0.1% [22] - The average wage for US and Canada employees is now over $31 per hour, reflecting the company's commitment to employee compensation [12] Company Strategy and Development Direction - The company plans to open 28 new warehouses in fiscal year 2025, with a focus on expanding gas station hours to enhance member convenience [9][10] - The company aims to leverage its global buying power and strong supplier relationships to maintain value for members amid inflation and potential tariff impacts [14] - The strategy includes a focus on enhancing the Kirkland Signature brand and expanding local sourcing to reduce costs [42][43] Management's Comments on Operating Environment and Future Outlook - Management noted that consumers remain focused on quality and value, with a willingness to spend, although they are becoming more selective [66][67] - The company is prepared to manage potential tariff impacts and is closely monitoring the situation [86][87] - Management expressed confidence in the long-term growth prospects of international markets, with plans for continued expansion [101][102] Other Important Information - Capital expenditures for Q2 were approximately $1.14 billion, with an estimated full-year CapEx of around $5 billion [38] - The company reported a slight increase in gross margin, with a reported rate of 10.85% [29] Q&A Session Summary Question: Impact of consumer behavior on discretionary and non-discretionary spending - Management indicated that consumers are still willing to spend but are more selective, particularly in food categories [66][67] Question: Core margin trends and inflationary pressures - Management stated that while core on core margins were down slightly, overall gross margin improved, and they are focused on maintaining value for members [77][78] Question: Weather impact on sales - Management acknowledged some weather-related impacts but noted recovery in sales [85] Question: Tariff management strategies - Management indicated a dual approach of absorbing costs where possible and passing on necessary increases to consumers [86][87] Question: Kirkland Signature product introductions - Management highlighted opportunities in non-food categories and emphasized a strategic approach to new product launches [120][121] Question: Wage pressures and productivity opportunities - Management confirmed that while wage increases present a headwind, they are focused on improving productivity to offset these costs [133][134]

Sales Performance - Net sales reached $62.5 billion, representing a 9.1% growth[4] - Comparable sales increased by 6.8%[4] - E-commerce comparable sales grew by 20.9%, and adjusted e-commerce comparable sales (excluding FX impacts) increased by 22.2%[4] - US comparable sales increased by 8.3%, while adjusted US comparable sales increased by 8.6%[6] - Comparable ticket increased by 1.0%, while adjusted comparable ticket increased by 3.2%[4] - Comparable traffic increased by 5.7%[4] Financial Highlights - Gross margin was 10.85%, a 5 bps increase compared to Q2 FY'24[7] - Net income diluted EPS was $1.79 billion, a 2.6% growth[7] Membership Metrics - Membership income grew by 7.4%, or 9.4% excluding FX impacts[9] - Worldwide membership renewal rate was 90.5%, with the US/CN renewal rate at 93.0%[9] - Paid memberships reached 78.4 million, a 6.8% increase[9] - Total cardholders reached 140.6 million, a 6.6% increase[9] - Executive memberships totaled 36.9 million, with a penetration of sales to executive members at 73.8%[9] Warehouse Expansion - The company plans to expand to a total of 915 warehouses by the end of FY'25, with 629 in the US, 111 in Canada and 175 in other international locations[14]

Financial Data and Key Metrics Changes - Net income for Q2 2025 was $1.788 billion or $4.02 per diluted share, up from $1.743 billion or $3.92 per diluted share in the same quarter last year, reflecting an 8.4% growth when excluding a prior year tax benefit [17][18] - Operating income increased by 12.3% year-over-year, while net sales rose to $62.53 billion, a 9.1% increase from $57.33 billion [21][18] - Membership fee income grew by 7.4% year-over-year to $1.193 billion, with a 9.4% increase when excluding foreign exchange impacts [25] Business Line Data and Key Metrics Changes - US comparable sales increased by 8.3%, while Canada comp sales rose by 4.6% [21] - E-commerce comp sales surged by 20.9%, indicating strong growth in online sales [22] - Non-foods category saw mid-teens comparable sales growth, with significant performance in consumer electronics and gaming products [38] Market Data and Key Metrics Changes - Traffic increased by 5.7% worldwide and 5.6% in the US, with average transaction value up by 1% globally [23] - Foreign exchange negatively impacted sales by approximately 2.1%, while gas price deflation had a minor impact of 0.1% [22] - International business, particularly in Canada, delivered record results on a constant currency basis despite foreign exchange fluctuations [13] Company Strategy and Development Direction - The company plans to open 28 new warehouses in fiscal year 2025, with a focus on expanding gas station hours to enhance member convenience [9][10] - A new employee agreement was implemented to provide industry-leading pay and benefits, reflecting the company's commitment to its workforce [11][12] - The company aims to leverage its global buying power and strong supplier relationships to maintain value for members amid inflationary pressures [14] Management's Comments on Operating Environment and Future Outlook - Management noted that consumers remain focused on quality and value, with a willingness to spend, although they are becoming more selective [66] - The company is closely monitoring the impact of tariffs and inflation on consumer behavior and is prepared to adjust strategies accordingly [67][86] - Management expressed confidence in the long-term growth potential of international markets, with plans for continued expansion [101] Other Important Information - Capital expenditures for Q2 were approximately $1.14 billion, with an estimated full-year CapEx of around $5 billion [38] - The company reported a slight increase in gross margin, with a reported rate of 10.85% for Q2 [29] - Inflation was noted to be low single digits overall, with fresh foods experiencing the highest inflation [46][140] Q&A Session Summary Question: Impact of consumer behavior on discretionary and non-discretionary spending - Management indicated that consumers are still willing to spend but are more selective, particularly in light of rising prices for certain goods [66] Question: Core margin trends and inflationary pressures - Management stated that while core on core margins were down slightly, overall gross margin improved, and they remain committed to investing in member value [78] Question: Weather impact on sales - Management acknowledged some weather-related impacts but noted that they were able to recover most of the sales lost due to adverse weather conditions [85] Question: Strategy regarding tariffs and sourcing - Management indicated a dual strategy of accepting some cost increases while also seeking alternative sourcing options to mitigate tariff impacts [92] Question: Long-term international growth prospects - Management expressed optimism about international growth, with plans for new warehouse openings in various global markets [101] Question: Performance of general merchandise and electronics - Management noted that while consumer electronics are experiencing sluggish growth, there are opportunities for innovation and market share growth [107] Question: Kirkland Signature product introductions - Management highlighted the potential for growth in non-food categories and the strategic approach to introducing new Kirkland Signature items [120]

Core Insights - The Trump administration's tariffs on Canada and Mexico create uncertainty for Costco, but the company is well-prepared to handle potential impacts due to its strong supplier partnerships and nimble operations [1][2]. Financial Performance - Costco's second-quarter net sales increased by 9.1% to $62.53 billion, with net sales for the first 24 weeks of fiscal 2025 rising by 8.3% to $123.52 billion [4]. - Comparable sales grew by 6.8%, with U.S. sales up 8.3% and Canadian sales up 4.6%. eCommerce sales surged by 20.9% [5]. - February sales rose by 8.8% to $19.81 billion [5]. Membership and Customer Engagement - Membership income increased by 7.4%, with renewal rates at 90.5% globally and 93.0% in the U.S. and Canada [6]. - Paid memberships rose by 6.8% to 78.4 million, while total cardholders grew by 6.6% to 140.6 million. Executive memberships accounted for 36.9 million cardholders, representing 73.8% of worldwide sales [7]. Digital Growth - Digital metrics showed significant improvements, including a 13% increase in site traffic, a 10% rise in average order value, and a 19% increase in logistics deliveries [8]. - A new digital multi-vendor mailer is enhancing member engagement by allowing more targeted marketing [9]. Store Expansion - Costco plans to open 28 new stores by the end of fiscal 2025, currently operating 897 warehouses, including 617 in the U.S. and Puerto Rico, and 109 in Canada [7].

Core Viewpoint - Costco reported a revenue of $63.72 billion for the quarter ended February 2025, marking a 9% year-over-year increase, with an EPS of $4.02 compared to $3.71 a year ago, indicating strong financial performance despite a slight EPS miss against consensus estimates [1] Financial Performance - Revenue of $63.72 billion exceeded the Zacks Consensus Estimate of $63.22 billion by 0.79% [1] - EPS of $4.02 was below the consensus estimate of $4.09, resulting in an EPS surprise of -1.71% [1] - Membership fees revenue was reported at $1.19 billion, slightly below the average estimate of $1.21 billion, but showed a year-over-year increase of 7.4% [4] - Net sales revenue reached $62.53 billion, surpassing the average estimate of $62.08 billion, reflecting a year-over-year growth of 9.1% [4] Comparable Sales Metrics - Total comparable sales increased by 9.1%, outperforming the eight-analyst average estimate of 6.6% [4] - U.S. comparable sales rose by 8.3%, exceeding the average estimate of 6% [4] - Comparable sales in Canada increased by 4.6%, falling short of the average estimate of 6.1% [4] - Comparable sales for Other International markets were reported at 1.7%, significantly below the average estimate of 5.7% [4] Warehouse Metrics - Total number of warehouses worldwide was reported at 897, slightly below the average estimate of 903 [4] - In the U.S. and Puerto Rico, the number of warehouses was 617, compared to the estimated 620 [4] Stock Performance - Costco shares returned +0.5% over the past month, while the Zacks S&P 500 composite declined by -3.5% [3] - The stock currently holds a Zacks Rank 2 (Buy), suggesting potential outperformance against the broader market in the near term [3]