Costco came in ahead on the top and bottom line in the after-hours report today. EPS landed at $4.58 vs. the $4.55 estimate, while total revenue hit $69.60B against the $69.27B consensus. Net income rose to $2.035B from $1.788B a year ago — a 13.8% jump.
The comp sales numbers are where it gets interesting for the macro view. Total company comps ex-gas and FX came in at +6.7%, well above the +5.9% estimate. Including gas and FX, comps printed +7.4% vs. the +6.72% consensus. The U.S. adjusted number was +6.4%, Canada +7.6%, and Other International +7.1%.
Digitally-enabled comparable sales surged 22.6% in Q2 (21.7% adjusted), showing the consumer is still spending and increasingly doing it online through Costco’s platform.
Costco skews to the top side of the K-shape and that consumer is still doing well. The strength here doesn’t necessarily speak to the lower end of the income spectrum — but it does tell you discretionary spending hasn’t rolled over. Net sales growth of 9.1% YoY in this rate environment is notable. Membership fees rose to $1.355B from $1.193B, a 13.6% increase that reflects the recent fee hike flowing through and continued membership growth — a sign of sticky demand and consumer confidence in the value proposition.
The February sales month (four weeks ended March 1) showed acceleration too, with net sales up 9.5% YoY and total comps at +7.9% (+7.0% adjusted). The company flagged that Lunar/Chinese New Year timing gave a roughly 4% lift to Other International and ~0.5% to total company for the period, so strip that out and the underlying trend is still solid.
On the balance sheet, cash and equivalents jumped to $17.38B from $14.16B at fiscal year-end, with operating cash flow of $7.68B in the first half — up significantly from $6.01B in the year-ago period. Costco is throwing off cash. CapEx ran at $2.82B for the half, with the warehouse count now at 924 globally.
One thing worth watching: merchandise costs as a percentage of net sales ticked up slightly to 88.97% from 89.15% a year ago — actually a slight improvement. SG&A as a percentage of sales was 9.19% vs 9.06%, a modest increase likely reflecting wage and benefits pressure, though the operating leverage on the top line more than offset it. Operating income grew 12.5% YoY.
The company didn’t comment on tariffs and potential refunds in its report.
Shares fell 2.6% in regular trading today and fractionally lower in after-hours trade. The conference call starts shortly.
