Costco Wholesale Corp. ((COST)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Costco’s recent earnings call painted a mostly positive picture, highlighting robust financial performance and strategic growth initiatives. The company reported significant growth in net sales and e-commerce, alongside successful warehouse expansions and membership increases. Despite facing challenges such as increased SG&A rates, tariff impacts, and declining membership renewal rates, the overall sentiment was optimistic, suggesting a favorable outlook for the future.
Strong Financial Growth
Costco’s fiscal year 2025 net sales reached nearly $270 billion, marking an impressive 8% increase from the previous year. E-commerce sales also saw a substantial rise, exceeding $19.6 billion, which represents a growth of over 15%. This financial growth underscores Costco’s effective strategies in capturing market demand and expanding its digital footprint.
Warehouse Expansion
In the fourth quarter, Costco opened 10 new warehouses, contributing to a total of 27 new warehouses for the fiscal year, bringing the worldwide total to 914. The company plans to continue this expansion with 35 new warehouses slated for fiscal year 2026, indicating a strong commitment to increasing its physical presence globally.
Membership Growth
Costco reported a 14% increase in membership fee income year over year, with total paid members reaching 81 million, a 6.3% increase from the previous year. Executive memberships saw a 9.3% rise, reflecting the company’s ability to attract and retain a loyal customer base.
E-commerce and Technology Advancements
The company experienced a 27% increase in e-commerce site traffic, with significant growth in categories like gold and jewelry, housewares, and apparel. Additionally, Costco rolled out enhanced checkout technology across all US warehouses, aiming to improve the customer shopping experience.
SG&A Rate Increase
The SG&A rate for the fourth quarter increased by 17 basis points year over year, primarily due to investments in employee wages and general liability charges. This increase reflects Costco’s ongoing commitment to enhancing its workforce and operational capabilities.
Impact of Tariffs
Tariffs have posed challenges for Costco, prompting the company to adopt various strategies to mitigate potential price increases. These include altering item assortments and sourcing, demonstrating Costco’s adaptability in navigating complex trade environments.
Membership Renewal Rate Decline
The US and Canada membership renewal rates declined to 92.3%, largely due to a higher number of online sign-ups. This trend is expected to continue, potentially impacting renewal rates in the near future.
Forward-Looking Guidance
Looking ahead, Costco plans to open 35 new warehouses in fiscal year 2026, with five being relocations. The company remains optimistic about expanding its market share despite macroeconomic uncertainties, aiming to maintain its reputation for delivering high-quality items at competitive values. Costco’s strategic focus on supply chain enhancements and increased Kirkland Signature penetration is expected to further bolster its financial performance.
In summary, Costco’s earnings call highlighted a strong financial performance with significant growth in net sales and e-commerce. While challenges such as increased SG&A rates and declining membership renewal rates were noted, the overall sentiment was positive. Costco’s strategic initiatives, including warehouse expansion and technological advancements, position the company well for future growth and market leadership.