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    COST
    Earnings call· Aug 2025(Q4 FY25)

    COSTCO WHOLESALE CORP /NEW COST

    Sep 25, 2025 Source

    Executive summary

    Costco Q4 FY25 — Strong Sales and Membership Growth Amidst Strategic Investments

    Costco delivered strong Q4 FY25 results, driven by robust comparable sales and significant membership growth, particularly in executive tiers. The company is strategically navigating macroeconomic uncertainties and tariff impacts through proactive sourcing and assortment adjustments, while investing in member benefits, digital capabilities, and warehouse expansion. Management remains confident in its ability to grow market share by continuing to deliver value and enhance the member experience.

    Highlights

    5

    • Net sales for fiscal year 2025 reached just under $270 billion, an increase of over 8% versus last year.

    • E-commerce sales exceeded $19.6 billion for FY25, increasing over 15% year-over-year.

    • Membership fee income grew 14% year-over-year to $1.72 billion in Q4 FY25.

    • Paid executive memberships increased 9.3% to 38.7 million at Q4 end, representing 74.2% of worldwide sales.

    • Comparable sales were up 6.4% in Q4 FY25, adjusted for gas deflation and FX.

    Concerns

    3

    • Worldwide membership renewal rate declined to 89.8% at Q4 end, largely due to a higher number of online sign-ups.

    • LIFO negatively impacted the gross margin rate by 6 basis points in Q4 FY25, resulting in a $43 million charge.

    • SG&A rate was higher by 9 basis points adjusted for gas deflation, partly due to investments in employee wages and a 5 basis point impact from general liability charges.

    Guidance & targets

    2
    CategoryTargetConfidence
    New warehouse openings
    35 warehouses
    high materiality
    High
    Capital expenditure
    Growth over 2025 and probably a little bit higher than sales growth
    medium materiality
    Medium

    Segment performance

    1
    SegmentRevenueYoYQoQMargin
    E-commerce
    E-commerce sales for the full fiscal year 2025 exceeded $19.6 billion. Q4 comparable sales were strong, led by gold and jewelry, housewares, apparel, and majors. Costco Logistics continues to improve member experience scores, marking the 15th consecutive quarter of improvement.
    Comparable sales: 13.6%Comparable sales (adjusted for FX): 13.5%Site traffic growth: 27%Items delivered growth: 13%
    		$19.6 billionover 15%——

    Operational metrics

    48
    Net income
    $2.61 billionup 11% YoY
    Q4 FY25

    Excluding a nonrecurring tax benefit of $63 million ($0.14/share) in Q4 FY24, net income grew 14% YoY.

    Diluted EPS
    $5.87up 11% YoY
    Q4 FY25

    Excluding a nonrecurring tax benefit of $0.14/share in Q4 FY24, EPS grew 14% YoY.

    Net sales
    $84.43 billionup 8% YoY
    Q4 FY25

    Compared to $78.8 billion in Q4 FY24.

    Net sales
    just under $270 billionover 8% vs last year
    FY25

    Full fiscal year net sales.

    Membership fee income
    $1.72 billionup 14% YoY
    Q4 FY25

    Last September's U.S. and Canada membership fee increase accounted for a little less than half of the growth.

    Membership fee income growth (ex-fee increase and FX)
    7%YoY
    Q4 FY25

    Driven by continued growth in membership base and increased upgrades.

    Paid executive memberships
    38.7 millionup 9.3% vs last year
    Q4 FY25 end

    Lift in upgrades seen after announcing executive member exclusive hours and Instacart benefits.

    Executive members as % of paid members
    47.7%
    Q4 FY25 end

    Represents the proportion of paid members who are executive members.

    Executive members as % of worldwide sales
    74.2%
    Q4 FY25 end

    Indicates the sales contribution from executive members.

    Total paid members
    81 millionup 6.3% vs last year
    FY25 end

    Total paid members at the end of the fiscal year.

    Total cardholders
    145.2 millionup 6.1% year-over-year
    FY25 end

    Total cardholders at the end of the fiscal year.

    U.S. and Canada renewal rate
    92.3%
    Q4 FY25 end

    Renewal rate for the U.S. and Canada region.

    Worldwide renewal rate
    89.8%
    Q4 FY25 end

    Decline largely attributable to a higher number of online sign-ups entering the renewal calculation, including a large Groupon campaign in December 2023.

    Gross margin rate (ex-gas deflation)
    higher by 3 bpsYoY
    Q4 FY25

    Gross margin rate increased by 3 basis points year-over-year when excluding the impact of gas deflation.

    Core gross margin rate
    higher by 30 bpsYoY
    Q4 FY25

    Core gross margin rate increased by 30 basis points year-over-year.

    Core gross margin rate (ex-gas deflation)
    higher by 22 bpsYoY
    Q4 FY25

    Core gross margin rate increased by 22 basis points year-over-year when excluding the impact of gas deflation.

    Ancillary and other businesses gross margin
    lower by 11 bpsYoY
    Q4 FY25

    Mainly driven by gas. Lower by 13 bps without gas deflation.

    LIFO charge
    $43 millionvs $8 million credit in Q4 FY24
    Q4 FY25

    Negatively impacted gross margin rate by 6 basis points. In line with estimate, as overall inflation remained consistent with Q3.

    SG&A rate (adjusted for gas deflation)
    higher by 9 bpsYoY
    Q4 FY25

    Partly due to investments in employee wages and a 5 bps negative impact from general liability charges and reserves.

    Operations component of SG&A
    higher by 15 bpsYoY
    Q4 FY25

    Increased partly due to employee wage investments.

    Operations component of SG&A (ex-gas deflation)
    higher by 8 bpsYoY
    Q4 FY25

    Increased partly due to employee wage investments.

    Interest expense
    $46 millionvs $49 million last year
    Q4 FY25

    Reported interest expense for the quarter.

    Interest income
    $169 millionvs $138 million last year
    Q4 FY25

    Reported interest income for the quarter.

    FX and other gain
    $46 millionvs $18 million loss last year
    Q4 FY25

    Reported gain from foreign exchange and other items.

    Q4 tax rate
    25.6%vs 24.4% last year
    Q4 FY25

    Last year's tax rate included a nonrecurring benefit of $63 million related to a transfer pricing settlement and true-ups of tax reserves.

    Capital expenditure
    $1.97 billion
    Q4 FY25

    Capital expenditure in the fourth quarter.

    Capital expenditure
    a little under $5.5 billion
    FY25

    Total capital expenditure for the full fiscal year.

    Hotdog combos sold
    over 245 million
    FY25

    Volume of hotdog and soda combos sold.

    Rotisserie chickens sold
    over 157 million
    FY25

    Volume of rotisserie chickens sold.

    Average hourly U.S. wage
    over $31
    March 2025

    Result of pay raises in March 2024, July 2024, and March 2025.

    Fresh sales growth
    high single digits
    Q4 FY25

    Led by double-digit growth in meat, with strong unit growth across premium and lower-cost proteins.

    Nonfood comp sales growth
    high single digits
    Q4 FY25

    Driven by new and exciting items resonating with members, with gold and jewelry, gift cards, majors, toys, and men's apparel all up double digits.

    Food and sundries comp sales growth
    mid- to high single digits
    Q4 FY25

    Cola and candy showed the strongest results.

    Gas volumes growth
    positive low single digits
    Q4 FY25

    Benefited from longer gas station hours, new gas stations, and expansions.

    Overall inflation
    low to mid-single-digit range
    Q4 FY25

    Consistent with Q3. The return of nonfood inflation contributed to the LIFO charge.

    Kirkland Signature value proposition
    15% to 20% value
    Q4 FY25

    Compared to national brand alternatives with equal or better quality.

    New KS items launched
    over 30
    Q4 FY25

    Including grass-fed beef sticks, organic extra firm tofu, and various apparel items.

    Costco Logistics items delivered growth
    13%
    Q4 FY25

    Reflects strong member resonance with delivery experience including installation and haul away.

    Costco Logistics member experience scores
    improved15th consecutive quarter
    Q4 FY25

    Indicates consistent positive feedback on delivery services.

    Return on ad spend (Kimberly Clark campaign)
    14:1
    Q4 FY25

    Executed on third-party websites, demonstrating strong effectiveness of targeted campaigns.

    Traffic increase (Kimberly Clark campaign)
    22%
    Q4 FY25

    Increase in traffic to product detail pages.

    Digital sales increase (Kimberly Clark campaign)
    45%
    Q4 FY25

    Increase in digital sales of promoted items.

    Digitally enabled sales
    more than $27 billion
    FY25

    Total sales that originated online, including same-day delivery, Costco Travel, Business Center delivery, and other direct-to-member businesses.

    U.S. sales lift from extended hours
    about 1%
    since June 30

    From executive member exclusive operating hours and additional Saturday evening hour, very well received by members.

    New member sign-ups under 40
    almost half
    Q4 FY25

    Indicates a growing number of younger members flowing into the base.

    Business Centers in Canada
    6
    Q4 FY25

    Company plans to grow Business Centers at a much quicker rate in Canada.

    Business Center delivery
    about 60%
    Q4 FY25

    Of goods delivered from trucks, indicating a significant delivery component.

    Average U.S. warehouse age
    around 20 years
    Q4 FY25

    Highlights the opportunity for remodels and refreshes to support best-in-class service.

    Industry KPIs

    9
    MetricValueDetails
    Sg a rate9.21%%
    Gross margin drivers11.13%%
    Fuel gas station economicsnegative mid- to high single digits%
    Warehouse store club count914warehouses
    Comparable same store sales5.7%%
    E commerce digital sales growth13.6%%
    Advertising retail media revenue14:1ratio
    Private label own brand penetrationincreased
    Category level comps and inflation deflationlow to mid-single-digit range%

    Product announcements

    9
    ProductTypeDetails
    Coca-Colaexpansion
    Kirkland Signaturemilestone
    Executive Member Exclusive Operating Hourslaunch
    $10 Instacart Creditlaunch
    Enhanced Checkout Technologyupdate
    Digital and E-commerce Enhancementsupdate
    New National Brand Partnershipsexpansion
    Combo Calzonelaunch
    Digitally Enabled Comparable Sales Metricupdate

    Capital programs

    1
    Warehouse Growth, Remodels, and Infrastructureunderway
    Period spend: $1.97 billion (Q4 FY25), a little under $5.5 billion (FY25)

    Benefit: Accelerated warehouse growth (35 planned openings in FY26), refreshed existing warehouses, best-in-class member experience, expanded hot dog production, new coffee roasting facility, future depot expansions.

    Investments in Q4 supported accelerated warehouse growth, including 35 planned openings in FY26. Increased pace of spend on remodels. Includes land purchases for future depot expansions and investments in manufacturing facilities for expanded hot dog production and a new coffee roasting facility.

    Risks & headwinds

    6
    Macroeconomic uncertaintyFiscal Year 2026

    null

    Mitigation: Confident in ability to grow market share by continuing to deliver exciting, high-quality items at the best value for members.

    Tariff impactsOngoing

    $43 million LIFO charge in Q4 FY25 (6 bps negative impact on gross margin rate)

    Mitigation: Moving KS product sourcing locally, consolidating buying efforts globally, changing item assortment, leaning into KS items, increasing domestically sourced goods. Taking an offensive approach to mitigate impacts before passing on price.

    Membership renewal rate declineExpected to continue for a few more quarters

    Worldwide rate 89.8% (down from 92.3% in U.S./Canada)

    Mitigation: Investing in auto-renewal, targeted digital communications, and broader engagement for online sign-ups to improve future rates for this cohort of new members.

    Increased employee wagesQ4 FY25 and ongoing

    Mid-single-digit basis points impact from March employee agreement; mid- to high single-digit basis points from July 2024 off-cycle increase (affecting Q4 FY25)

    Mitigation: Leveraging strong top-line sales and improving labor productivity to absorb significant investments with minimal impact to SG&A rate.

    General liability charges and reservesQ4 FY25

    Approximately 5 basis points negative impact on SG&A

    Gas price deflationQ4 FY25

    Negatively impacted sales by approximately 0.9% in Q4 FY25

    What to watch in Q1 FY26

    5

    Worldwide membership renewal rate

    Next few quarters
    Current89.8%
    TargetStabilization or improvement

    Why it matters

    The renewal rate is an important measure of member loyalty and long-term revenue stability, especially as the mix shifts towards online sign-ups.

    We would, therefore, expect to continue to see a small decline in our renewal rate as this change in membership mix gets fully reflected in our renewal rate calculation. That being said, through a focus on auto renewal and targeted digital communications, our goal is to improve the renewal rate for this cohort of new members in the future.

    Q&A highlights

    5

    To what extent are members aware of the extended hours, and do you expect the 1% comp lift to become much larger?

    Management confirmed good communication efforts (in-warehouse signage, executive member emails) and positive initial traffic. While the 1% lift is based on initial analysis, they noted that full impact on shopping behavior can take longer to unfold, but the national launch gained significant visibility.

    “I think we've been pleased with the response we've seen, but there's certainly probably more time to unfold to see exactly how it plays out.”

    asked by Christopher Horvers · answered by Gary Millerchip

    2 min read6 chapters

    Detailed Narrative

    01

    Warehouse Expansion and Real Estate Strategy

    Costco opened 24 net new warehouses in fiscal year 2025, bringing the total to 914 worldwide, and plans to open 35 more in FY26, including 5 relocations. The company sees significant opportunities for expansion both domestically and internationally. Management is open to using the balance sheet to acquire chunks of real estate in strategic markets to accelerate development, especially for business centers and in areas where real estate acquisition has been challenging.

    02

    Membership Engagement and New Benefits

    New executive member exclusive operating hours and a $10 monthly Instacart credit for purchases over $150 were introduced on June 30, leading to a meaningful increase in upgrades from Gold Star to executive membership. These initiatives have added about 1% to weekly U.S. sales. The company is also rolling out enhanced checkout technology in U.S. warehouses to speed up transactions and improve the member experience.

    03

    Digital and E-commerce Roadmap Progress

    Costco continues to advance its digital strategy with enhancements such as data augmentation for improved search effectiveness, passwordless sign-in for the mobile app, and waiting rooms for high-velocity items to manage bot traffic. Starting with the September sales release, the company will report 'digitally enabled comparable sales,' which will include all online-originated sales, aligning with retail peer reporting. For FY25, digitally enabled sales totaled over $27 billion.

    04

    Kirkland Signature and Sourcing Strategy

    Kirkland Signature (KS) celebrated its 30th anniversary and continues to increase its sales penetration, offering members 15% to 20% value compared to national brands. The company is actively moving KS product sourcing into the countries and regions where items are sold to lower costs and mitigate tariff impact🌐s. Over 30 new KS items were launched in Q4 FY25, including grass-fed beef sticks and organic tofu.

    05

    Inflation and Tariff Management

    Overall inflation remained in the low to mid-single-digit range in Q4 FY25, consistent with Q3. While fresh and food/sundries saw mixed inflation (e.g., higher in beef/coffee, lower in produce/eggs), nonfood inflation returned after being deflationary for about 12 months. Costco employs a multi-pronged approach to mitigate tariffs, including absorbing costs, working with suppliers for global buying, sourcing from different countries, and adjusting item assortments, with a focus on being offensive and passing on price as a last resort.

    06

    Holiday Assortment and Sales Performance

    For the upcoming holiday season, Costco's buyers have pivoted their assortment strategy, thinning traditional discretionary items like toys and decorations to make space for new categories. This includes bringing in items like backyard sheds, saunas, and furniture, which are performing well and are relevant to the time of year, despite not being traditional holiday offerings. This approach aims to maximize top-line sales by utilizing space more effectively.

    AI-generated summary of the company’s earnings call. Not investment advice.