Costco Wholesale Corporation continues to demonstrate its leadership in the retail industry, delivering impressive financial results for its fiscal first quarter. The company’s strong performance, driven by strategic investments in e-commerce and consumer engagement, not only exceeded Wall Street expectations but also showcased its ability to navigate a volatile economic landscape while maintaining growth.
During the three-month period ending November 24, Costco reported net income of $1.80 billion, or $4.04 per share, significantly outperforming analysts’ expectations of $3.79 per share. Revenue rose to $62.15 billion, marking a substantial year-over-year increase from $57.80 billion. This robust performance underscores Costco’s operational resilience and its capacity to adapt to consumer demands amid fluctuating economic conditions.
E-commerce emerged as a key driver of Costco’s success, with sales increasing by 13% year-over-year. CEO Ron Vachris highlighted the company’s record-breaking achievement of nearly one million deliveries during the quarter, emphasizing the effectiveness of its logistical infrastructure and market penetration strategies. Enhanced digital capabilities, such as improved user experience, higher conversion rates, and an increase in average order values, further cemented Costco’s competitive edge in the online retail space.
The company’s product mix also reflected evolving consumer preferences. In the fresh food category, Costco saw high single-digit growth, with strong performances in meat and produce sales. CFO Gary Millerchip noted a clear bifurcation in consumer behavior: while some members gravitated toward premium cuts of meat, others opted for more budget-friendly options such as poultry and less expensive cuts of beef and pork. These trends not only highlight Costco’s versatility in catering to diverse consumer needs but also its ability to maintain value propositions across various price points.
Costco’s private label brand, Kirkland Signature, continued to outperform, reflecting its growing importance within the company’s overall strategy. By strategically reducing prices on select items, such as organic peanut butter and Sauvignon Blanc, Costco demonstrated its commitment to providing high-quality products at competitive prices. Non-grocery categories, including home furnishings, jewelry, and sporting goods, also saw significant growth, contributing to Costco’s diversified revenue streams.
Membership revenue remained a cornerstone of Costco’s financial performance. The company’s membership fee revenue rose to $1.17 billion, an 8% year-over-year increase, excluding foreign exchange impacts. Despite a recent fee hike, its impact on quarterly results was limited due to deferred accounting practices. Membership renewal rates remained strong at 90.4%, with a slight dip attributed to new digital signups, which tend to renew at lower rates initially. By the end of the quarter, Costco reported 77.4 million paid household members and 138.8 million total cardholders, reflecting an 8% year-over-year increase.
Operational milestones underscored the company’s efficiency and consumer appeal. The bakery division set new records, selling 4.2 million pies in the three days leading up to Thanksgiving, while the food court achieved impressive sales, including 274,000 pizzas on Halloween. Ancillary services, such as optical departments and travel offerings, further complemented the retailer’s core operations, enhancing its overall value proposition.
Costco’s expansion strategy also gained momentum, with seven new warehouse clubs opened during the quarter and plans to add 29 more locations in the fiscal year, including ten international sites. This focus on expanding its global footprint reflects Costco’s commitment to scaling its operations while maintaining its market dominance in the U.S., where it operates 617 out of nearly 900 clubs worldwide.
The company’s stock performance has been equally remarkable, with shares surging nearly 50% year-to-date, significantly outpacing the S&P 500’s 27% gain. Closing at $988.39 on Thursday, this growth underscores investor confidence in Costco’s ability to sustain long-term success through strategic investments and operational excellence.
