Costco Exceeds Wall Street Expectations as E-Commerce Growth Accelerates
According to CNBC, Costco reported earnings per share of $4.50 on Thursday, December 11, surpassing analyst expectations of $4.27. The warehouse retailer generated revenue of $67.31 billion for its fiscal first quarter ended November 23, exceeding the $67.14 billion projected by LSEG analysts. Net income reached $2 billion, up from $1.80 billion in the same period last year.
The company posted year-over-year sales growth of 8.2 percent during the three-month period. CFO Gary Millerchip confirmed that digital sales jumped 20.5 percent compared to the prior year. Website traffic increased 24 percent while mobile app traffic rose 48 percent. Same-day delivery through Instacart, Uber, and DoorDash expanded faster than overall digital sales.
Costco added eight new warehouse locations during the quarter, including four in the United States, two Canadian business centers, one relocation in Canada, and the company's third location in France. The additions brought total global store count to 921 locations. CEO Ron Vachris stated the company plans to open 30 or more clubs annually in future years.
Why This Matters
The earnings beat demonstrates consumer resilience despite economic headwinds affecting retail. Paid membership reached 81.4 million, representing 5.2 percent year-over-year growth. Total cardholders expanded 5.1 percent to 145.9 million. The September 2024 membership fee increase in the United States and Canada contributed to revenue gains as new and existing members renewed at higher rates.
Digital transformation efforts are reshaping customer behavior at the warehouse club. Black Friday set a record for single-day sales at United States locations. The strong online performance contrasts with broader retail trends. Digital Commerce 360 reports United States e-commerce grew 5.3 percent year-over-year in the second quarter of 2025, the slowest rate since late 2022. Costco's 20.5 percent digital growth outpaced the national average by nearly four times.
The retailer attracted shoppers across income levels seeking value for groceries, household essentials, and holiday purchases. Younger consumers continue joining warehouse clubs at increasing rates. The combination of bulk pricing power and expanded digital access positions Costco to capture market share during periods of consumer caution.
Industry Implications
Warehouse clubs are gaining ground in a competitive retail environment shaped by tariffs and supply chain pressures. The Mintel US Warehouse Clubs Market Report projects the sector will exceed $270 billion in 2025, growing approximately 4.5 percent from the previous year. Industry-wide membership penetration stands at 56 percent of United States consumers, with younger generations representing untapped growth potential.
Costco's private label Kirkland Signature provides a buffer against import duty impacts. Millerchip noted the company sources more items domestically, consolidates global purchasing, and adjusts product categories to reduce tariff exposure. The retailer sued the Trump administration in late November seeking refunds on paid tariffs and blocking future collections pending a Supreme Court ruling.
The membership model generates predictable high-margin revenue that insulates earnings during economic uncertainty. Renewal rates above 90 percent provide visibility into future performance. However, questions remain about valuation sustainability at current price levels. The stock trades at approximately 48 times trailing earnings, leaving limited room for disappointment.
Traditional retailers face mounting pressure as warehouse clubs combine low prices with digital convenience. Costco's fresh food sales grew mid-to-high single digits, with meat sales up double digits. The pharmacy department implemented artificial intelligence for inventory management, raising in-stock levels above 98 percent while supporting mid-teen prescription fill growth. These operational improvements suggest warehouse clubs can maintain momentum through technology adoption rather than price wars alone.
Further Reading
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