Key Takeaways
- Q3 earnings per share reached $4.93, falling short of the $4.98 Wall Street forecast, while revenue of $70.5 billion surpassed expectations
- Comparable store sales increased 6.6%; digital comparable sales surged 20.4% during the period
- Gasoline sales volumes hit unprecedented levels as pump prices climbed to $4.42 per gallon nationally
- Profit margins contracted from 11.25% to 11.04% year-over-year, pressured by fresh foods and freight expenses
- Year-to-date, COST stock has gained approximately 15%, though it retreated over 7% following May 20
Costco (COST) stock ticked 0.3% higher during Friday’s premarket session following the warehouse giant’s release of fiscal third-quarter financial results on May 28 that presented a mixed picture.
Costco Wholesale Corporation, COST
Shares had already declined more than 7% from May 20, coinciding with earnings announcements from competing retail chains. This earlier decline likely tempered investor response to the earnings shortfall.
Costco delivered earnings of $4.93 per share for the period concluded May 10, falling below the analyst consensus of $4.98. Total revenue registered $70.5 billion, marking an 11.5% year-over-year increase and exceeding the $69.68 billion Wall Street projection.
Comparable store sales advanced 6.6% during the quarter. Membership fee revenue expanded 10.5% versus the previous year, totaling $1.37 billion, representing a deceleration from the prior quarter’s 14% expansion.
The company’s paid membership base grew 4.1% for the period. Management reported that renewal percentages remained elevated.
E-Commerce and Fuel Sales Shine
Digital-channel comparable sales posted robust 20.4% growth for the complete quarter. Online platform and mobile application visits jumped 37% compared to the same period last year. Customized digital marketing initiatives generated conversion percentages triple the site-wide average, contributing to approximately $5 billion in online revenue.
Fuel sales emerged as another performance highlight. Chief Executive Ron Vachris informed analysts that the retailer experienced “record-breaking” gasoline volumes approaching quarter-end. AAA data shows the nationwide gasoline average reached $4.42 per gallon, representing a 25-cent increase within one month and rising from $3.16 twelve months earlier.
“The high consumer price sensitivity, which fueled these record volumes, also drove many members to use our gas stations for the very first time in the third quarter,” Vachris said.
Chief Financial Officer Gary Millerchip noted that members utilizing fuel stations demonstrate increased overall spending patterns and superior renewal rates.
Profitability Faces Headwinds
Gross profit margin declined from 11.25% in the prior-year period to 11.04% this quarter. Management attributed this compression to reduced profitability on perishable merchandise such as meat products and eggs, combined with elevated freight expenses.
Quarterly net income totaled $2.19 billion, representing a 15% year-over-year improvement.
The retailer has submitted applications to the Trump administration seeking tariff reimbursements but emphasized that any approved refunds would not enhance corporate profitability. Company leadership intends to transfer these savings directly to shoppers.
“Our goal is to be the first to lower prices and the last to raise them,” Vachris said on the earnings call.
COST stock currently commands a forward price-to-earnings ratio of 48.5, exceeding Walmart’s forward P/E multiple of approximately 41.
Shares have appreciated roughly 15% year-to-date, outperforming the S&P 500, and established fresh record highs earlier this year before the recent correction.
After-hours trading activity remained muted following the earnings announcement, with the forward valuation multiple holding at 48.5 amid ongoing margin challenges.
