ii view: Costco Q1 exceeds expectations

First-quarter results to 30 November  

• Total revenues up 8.3% to $67.3 billion
• Adjusted comparable sales up 6.4% year over year
• Adjusted earnings up 11.4% to $4.50 per share

ii round-up:

Members-only retailer Costco Wholesale Corp (NASDAQ:COST) has detailed sales and profits that beat Wall Street forecasts, driven by a one-fifth increase in digital sales including categories such as jewellery and small electricals. 

Total first-quarter revenues to late November rose 8.3% to $67.3 billion, fuelling growth in adjusted earnings of 11.4% to $4.50 per share. Analysts had expected $67.1 billion and $4.27 per share respectively. Costco currently outsources same-day delivery services to providers Instacart in the US and Uber Technologies Inc (NYSE:UBER) and DoorDash Inc Ordinary Shares - Class A (NASDAQ:DASH) overseas. 

Shares in the S&P 500 retailer drifted 1% lower in post results trading having come into this latest news little changed so far in 2025, although they're up more than 130% over the last five years. The S&P 500 index is up 17% year-to-date and 88% over the last five years. Amazon.com Inc (NASDAQ:AMZN) is up 5% so far in 2025 and 48% over the last five years. 

• Invest with ii: Buy US Stocks from UK | Most-traded US Stocks | Cashback Offers

Costco operates 923 warehouses globally, up from 914 in Q4, including 633 in the USA, 114 in Canada, 42 in Mexico, 29 across the UK and three in France. 

Customer paid memberships during the quarter climbed 5.2% to 81.4 million with related revenues up 14% to $1.32 billion.

The average order size for digital orders rose 13% during the quarter, with website traffic up 24% from a year ago. Online initiatives have included personalised product recommendations and ongoing improvements to search capability. 

Management said Black Friday had proved a record breaker for the retailer, with the US e-commerce business generating $250 million in non-food orders. 

Other popular online categories included pharmacy, apparel and tyres. 

Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the results. 

ii view:

Opening its first warehouse in Seattle 1983, Costco today serves almost one-third of the US population. Headquartered in Issaquah, Washington on the West coast, the group’s former HQ in Kirkland remains the name of its own branded label. 

Employing more than 330,000 people globally, the US remains its biggest sales generator at 72% of 2024 sales. That was followed by Canada at 13.7% and other combined international businesses the balance of almost 14%. 

For investors, trade tariffs being applied on goods imported from overseas such as toys have pressured product shelf prices. A forecast dividend yield of under 1% compares to forecast yields of over 2.5% for fellow retailers The Home Depot Inc (NYSE:HD) and Best Buy Co Inc (NYSE:BBY). Costs for businesses generally remain elevated, while ongoing trade talks between the US and China could yet have an impact. 

• The cheapest Mag7 stock is now a buy
• 2026 look ahead: CHAOS or CALM?
• Watch our video: ARK Invest’s Cathie Wood: why we’re betting big on Tesla

More favourably, initiatives to aid digital sales are aiding performance. Diversity of revenue streams includes both membership fees and product sales, with the group’s geographical footprint also extensive. Scope for overseas expansion persists, while Costco’s membership model enables ongoing investment in competitive product pricing.   

On balance, and despite ongoing risks, this value retailer continues to justify its place in many diversified investor portfolios. 

Positives: 

• Product diversity
• Value orientated

Negatives:

• Intense competition
• Subject to currency moves

The average rating of stock market analysts:

Buy