Costco Wholesale ruffled some feathers earlier this year when it warned that subscription rates were going up for the first time since 2017, but the bulk discounter beat earnings estimates for its fiscal first quarter yesterday.
And along with Walmart, the discount retailer has successfully surfed the inflation wave this year as price conscious consumers have turned to cheaper options in order to manage their household costs.
Overall, an 11% jump in Costco’s earnings prior to interest and tax meant that for the three months ended Nov. 24, Costco delivered earnings per share of $4.04 a share, up 13% on a year prior, and significantly up on the $3.79 estimate by analysts.
The retail club operator posted revenue of $62.15 billion, up about 8% and broadly in line with expectations for the quarter.
For fiscal Q1 2025, same-store sales rose 7.1%, while membership fee income rose 7.8% to $1.17 billion, total traffic rose 5.1% worldwide and 4.9% in the U.S., reflecting high member loyalty and gains from its value-focused assortment.
E-commerce sales grew 13%, year on year. Impressive as that was, it was a slowdown on the stellar 19.5% gain in the prior fourth quarter, with gold and jewelry, hardware and gift cards helping drive sales online.
Costco Subscription Costs
Controversially, Costco raised its basic annual membership fee on Sept. 1 for the first time since 2017, to $65 from $60. The warehouse club said in its update that most of the benefit from the hike will come in the latter half of 2025 and into 2026.
Earlier this year, Costco announced a Netflix-style crackdown on its membership subscriptions and said it would raise the price of its Gold Star membership, though it did offer a promotional deal to offset the rise.
New membership card scanners have come in at stores across the U.S. as Costco cracked down on membership sharing, pushing ahead with technological updates amid taking steps to raise membership fees and insisting that it wanted to ensure members enjoyed the best deals.
Across its markets, in the quarter U.S. sales were up 5.2%, Canadian sales were up 5.8% and other international markets saw sales increase by 4.7%.
Markets reacted positively and Costco stock has risen nearly 5% this week since the earnings update Thursday, but the real story is in its inexorable rise this year, with the stock price up over 50% since the start of 2024.
Costco Challenges Ahead
However, investors are watching for any inflationary impact from incoming President Donald Trump’s promised tariff policies, which could raise prices on a multitude of imported products and would have the keenest impact on cheaper products.
Yet so far Costco and retail giant Walmart seem to have been impervious to outside economic challenges and have been inflation winners, as hard-pressed consumers have turned to discounters to make ends meet.
Costco currently operates 897 warehouses, including 617 in the United States and Puerto Rico, 109 in Canada, 41 in Mexico, 36 in Japan, 29 in the U.K., 19 in Korea, 15 in Australia, 14 in Taiwan, seven in China, five in Spain, two in France, and one each in Iceland, New Zealand and Sweden.
Costco also operates e-commerce sites in the U.S., Canada, the U.K., Mexico, Korea, Taiwan, Japan and Australia.
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