Costco Wholesale Corp. (COST) once again proved its resilience in a shaky retail landscape, posting stronger-than-expected earnings for its fiscal third quarter.
The warehouse giant reported earnings per share of $4.28—outpacing Wall Street’s estimate of $4.24—showcasing its ability to maintain momentum even as tariffs and economic uncertainty rattle consumer spending.
Revenue for the quarter, which ended May 11, came in at $63.2 billion. That figure, just shy of analyst expectations, still marks an 8% year-over-year increase—solid growth at a time when many competitors are revising guidance downward. Same-store sales rose 5.7%, with U.S. comps hitting nearly 8%.
In early Friday trading, Costco shares rose nearly 3%, building on a 10% gain so far this year. For investors, the results reinforce Costco’s reputation as a safe haven when market volatility and macro headwinds weigh heavily on retail stocks.
Membership Model Powers Growth, Defies Tariff Pressures
At the core of Costco’s strength is its fiercely loyal customer base and its value-driven membership model. Membership income rose 10.4% year-over-year to $1.24 billion, thanks in part to a prior-year fee increase that has not deterred renewals. In the U.S. and Canada, renewal rates remain an enviable 92.7%. Executive members—who pay more for additional perks—now account for nearly half of paid members and generate over 70% of total sales.
While many companies are reeling from the Trump administration’s tariffs, Costco has proven nimble. About a third of its U.S. sales are from imported goods, but less than half of those imports come from tariff-heavy regions like China, Mexico, or Canada. The retailer has rerouted some sourcing and brought more production stateside, particularly for home goods such as mattresses and pillows.
Costco’s leadership is approaching pricing on a case-by-case basis, holding prices steady on essential items like eggs and bananas, while raising them slightly on more discretionary goods like flowers. “It’s full-force ahead on lowering prices where we can,” said CEO Ron Vachris, highlighting the company’s ongoing efforts to protect member value.
E-Commerce Surge, Private Label Growth Bolster Outlook
Digital strength played a key role in the company’s Q3 results. Online sales jumped nearly 16% after adjusting for gas and currency effects, fueled by demand for electronics, jewelry, and travel essentials. Costco’s e-commerce channel is increasingly central to its growth strategy, supported by investments in delivery speed, exclusive products, and a better online experience.
The Kirkland Signature private label also outpaced overall sales growth, helping drive comps in food and sundries to mid-to-high single digits. Fresh foods performed especially well, with meat sales notching double-digit gains.
That said, not every metric dazzled. Total revenue came in just below expectations, and shares dipped slightly in after-hours trading Thursday. Still, analysts remain largely bullish. Of the 43 analysts covering the stock, 27 rate it a "Buy," with only one bearish call.
Target and Kraft Struggle, Walmart Keeps Pace
Costco’s performance stands in sharp contrast to peers like Target (TGT) and Kraft Heinz (KHC), both of which recently lowered their outlooks. Target’s same-store sales declined 3.8% in the first quarter, while Kraft Heinz trimmed expectations amid weaker consumer demand.
Walmart (WMT), by comparison, has stayed competitive. Its comps rose 4.3% in Q1, supported by grocery strength and a loyal base similar to Costco’s. But Walmart has warned of price increases ahead, especially in discretionary categories like toys and electronics—a potential opening for Costco’s value proposition to lure even more consumers.
With foot traffic outpacing both Walmart and Target, and a model built to weather economic storms, Costco remains well-positioned. As tariffs continue to cloud the retail outlook and inflation reshapes consumer behavior, shoppers appear to be placing their bets on value—and Costco is ready to meet the moment.
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