Costco’s shares dipped despite better-than-expected quarterly earnings and revenue, reporting an 8% year-over-year sales growth. In the fiscal third quarter, earnings per share reached $4.28, exceeding forecasts, while revenue rose to $63.21 billion. The company faces challenges from tariffs, as a significant portion of sales involves imported goods. Costco’s CEO highlighted strategies to minimize tariff impacts, including sourcing from different regions and optimizing inventory. The retailer maintains competitive prices and bulk discounts, attracting more customers. Despite tariff pressures, Costco managed to lower prices on staple items, while selectively raising prices on discretionary goods. Shares have risen 10% this year.
The sign on a Costco is visible in Hawthorne, California, on April 4, 2025.
Jay L Clendenin | Getty Images
Shares of Costco dipped slightly on Thursday, despite the warehouse retailer reporting quarterly earnings and revenue that exceeded estimates, along with an 8% year-over-year sales increase.
In contrast to many retailers, Costco does not offer an annual forecast. However, company executives addressed challenges and the increased costs resulting from tariffs during their earnings call.
Here’s how the warehouse retailer performed in its fiscal third quarter against Wall Street expectations, based on analyst surveys by LSEG:
- Earnings per share: $4.28 vs. $4.24 expected
- Revenue: $63.21 billion vs. $63.19 billion expected
Costco’s net income for the three-month period ending May 11 increased to $1.90 billion, or $4.28 per share, up from $1.68 billion, or $3.78 a year prior. Revenue grew from $58.52 billion in the same quarter last year.
Comparable sales, which exclude one-time factors such as store openings and closures, increased by 8%, while e-commerce sales surged nearly 16% compared to the same period last year, excluding gas and currency fluctuations.
As tariffs raise economic concerns and potentially consumer prices, Costco stands to gain. Volatile tariff policies could attract more customers to the warehouse club, known for its competitive pricing and bulk discounts, encouraging membership renewals. Moreover, its clubs offer discounted gas and groceries, which tend to maintain steady traffic, even when consumer spending decreases. Compared to some retailers, Costco has an advantageous position in price negotiations with suppliers due to its scale.
Approximately one-third of Costco’s U.S. sales involve imported goods, CFO Gary Millerchip noted during the earnings call. He added that products sourced from China account for about 8% of total U.S. sales.
Some retailers have warned that rising tariffs will lead to higher prices. Best Buy CEO Corie Barry stated Thursday that the retailer had already increased prices on certain consumer electronics due to tariffs. Cosmetics brand E.l.f. Beauty announced a price hike on its makeup products last week. Additionally, Walmart CFO John David Rainey warned earlier this month of impending price increases at the discounter’s stores and online in late May or June.
During the earnings call, CEO Ron Vachris stated that Costco is exploring ways to mitigate tariff costs while keeping prices affordable. He mentioned that the company expedited orders to bring them to the U.S. before tariffs were imposed. Products were rerouted from countries with high tariffs to non-U.S. markets, and more items for its private label, Kirkland Signature, were sourced from within the regions where they are sold.
Even with tariff increases, he mentioned that Costco has reduced the prices of certain items, including eggs, butter, and olive oil. Efforts are also underway to enhance the reasons for customers to sign up for or renew memberships, such as extending the operating hours of its gas stations that offer discounted fuel.
Compared to other retailers, Costco offers a narrower selection of items, like having fewer variations of peanut butter or diapers. Millerchip explained that this limited strategy allows Costco to be a larger buyer and collaborate more closely with suppliers on pricing. He added that the company can easily switch to different products if necessary.
In some instances, Costco has absorbed tariff-related cost fluctuations, while in others, it has raised prices, Millerchip noted. For example, the retailer chose to maintain the price of pineapples and bananas from Central and South America due to their status as essential items for consumers.
“We believed it was crucial to minimize the impact on our members by collaborating with our suppliers and by finding efficiencies, accepting that there may be a margin impact,” he stated.
Conversely, he mentioned that prices for flowers from Central and South America were increased since those items are deemed more discretionary.
As of Thursday’s market close, Costco shares have risen approximately 10% year-to-date, outperforming the S&P 500’s gains of less than 1% during the same timeframe.