Key Takeaways
- The warehouse giant delivered Q3 earnings of $4.93 per share, falling short of the $4.98 Wall Street consensus, while revenue of $70.5 billion exceeded expectations
- Comparable store sales increased 6.6%; digitally-enabled comparable sales surged 20.4% during the period
- The company achieved unprecedented gasoline sales volumes as quarter-end approached, with national pump prices reaching $4.42 per gallon
- Profitability metrics weakened as gross margin contracted from 11.25% to 11.04%, pressured by fresh food pricing and elevated freight expenses
- Shares have gained approximately 15% in 2025 but retreated over 7% from their May 20 peak
Costco (COST) stock climbed 0.3% during Friday’s premarket session following the membership warehouse operator’s release of fiscal third-quarter financial results on May 28 that presented a mixed picture.
Costco Wholesale Corporation, COST
Shares had already experienced a decline exceeding 7% since May 20, coinciding with earnings announcements from other prominent retail chains. This prior weakness likely moderated investor response to the profit shortfall.
Costco reported earnings per share of $4.93 for the quarter concluded May 10, falling beneath analyst projections of $4.98. Total revenue registered $70.5 billion, representing an 11.5% year-over-year increase and surpassing the consensus forecast of $69.68 billion.
Comparable store sales advanced 6.6% during the quarter. Membership fee revenue expanded 10.5% versus the corresponding prior-year period, totaling $1.37 billion, although this represented a deceleration from the previous quarter’s 14% expansion.
Paid membership count grew 4.1% for the quarter. Management indicated renewal rates sustained elevated levels.
E-Commerce and Fuel Operations Deliver Strong Performance
Digitally-enabled comparable sales advanced 20.4% for the complete quarter. Online platform and mobile application traffic increased 37% on a year-over-year basis. Customized digital commerce capabilities generated conversion rates triple those of average site performance, helping drive nearly $5 billion in online sales.
Fuel sales represented another area of strength. Chief Executive Ron Vachris informed analysts the organization experienced “record-breaking” gasoline transaction volumes approaching quarter-end. National average gasoline prices reached $4.42 per gallon, climbing 25 cents within a single month and rising from $3.16 twelve months earlier, according to AAA data.
“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 are generating higher overall expenditures and maintaining superior renewal rates.
Profitability Metrics Face Headwinds
Gross profit margin declined from 11.25% in the year-ago period to 11.04% in the current quarter. The company attributed this margin compression to reduced profitability on fresh food categories including beef and eggs, combined with increased logistics and transportation expenses.
Net profit for the quarter totaled $2.19 billion, advancing 15% year over year.
The retailer has submitted applications to the Trump administration seeking tariff reimbursements but indicated any approved refunds will not directly enhance corporate profitability. Management plans to transfer any cost savings to shoppers rather than retain them.
“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 trades at 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 in the year prior to the recent correction.
The stock exhibited minimal movement in extended trading hours following the earnings announcement, maintaining its forward P/E valuation of 48.5 while facing ongoing gross margin challenges.
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