Executive Summary
Costco delivered 8% revenue growth to $269.9 billion, with net income rising 10% to $8.1 billion. Membership fee revenue increased 10%, driven by new sign-ups and a September 2024 fee increase, while comparable sales rose 6% supported by higher shopping frequency.
What happened
Costco achieved broad-based revenue growth in fiscal 2025, with net sales increasing $20.3 billion to $269.9 billion. Comparable sales rose 6%, driven by a 5% increase in shopping frequency and approximately 1% in average ticket. The company opened 27 new warehouses, including three relocations, for a net addition of 24 warehouses. Membership fee revenue increased 10% to $5.3 billion, driven by new sign-ups and the September 2024 fee increase that accounted for approximately 40% of the growth. Gross margin percentage expanded 20 basis points to 11.12%, though excluding gasoline price deflation the increase was 11 basis points. Core merchandise categories benefited from improvements in fresh foods and the co-branded credit card program. SG&A expenses as a percentage of sales increased 11 basis points to 9.25%, or 3 basis points excluding gasoline deflation impacts. Net income rose 10% to $8.1 billion, despite the effective tax rate rising to 25.1% from 24.4%. Earnings per diluted share increased to $18.21 from $16.56. Foreign exchange rates negatively impacted net income by $97 million, or $0.22 per diluted share. Operating cash flow strengthened to $13.3 billion from $11.3 billion. Gasoline price deflation negatively impacted net sales by $2.3 billion, or 93 basis points, while foreign currencies negatively impacted sales by approximately $1.9 billion, or 78 basis points.
Why it matters for investors
The results demonstrate Costco's ability to sustain member loyalty and drive traffic through a combination of warehouse expansion and same-store sales momentum. The 10% increase in membership fee revenue, bolstered by the September 2024 fee increase, reinforces the profitability foundation of the membership model. Renewal rates of 92.3% domestically and 89.8% worldwide indicate strong member retention despite the fee increase. The 6% comparable sales growth, driven primarily by increased shopping frequency rather than ticket inflation, suggests healthy member engagement and the effectiveness of Costco's pricing authority strategy. Gross margin expansion of 20 basis points (11 basis points excluding gasoline) reflects improved merchandising mix and benefits from the co-branded credit card program, though this was partially offset by SG&A deleverage of 11 basis points. The company's ability to generate $13.3 billion in operating cash flow supports ongoing capital deployment, including $5.5 billion in capex and continued dividend growth. However, the elevated effective tax rate and modest SG&A deleverage indicate that margin expansion remains constrained. The company's U.S. and Canadian operations comprise 86% and 84% of net sales and operating income respectively, concentrating performance risk in these mature markets.
Bullish points
Membership fee revenue increased 10% to $5.3 billion, with the September 2024 fee increase contributing approximately 40% of growth and renewal rates remaining strong at 92.3% in U.S. and Canada. This demonstrates pricing power and sustained member loyalty.
Operating cash flow reached $13.3 billion, up 18% from $11.3 billion in the prior year, supporting capital reinvestment and shareholder returns including a 12% quarterly dividend increase.
Comparable sales growth of 6% was driven primarily by a 5% increase in shopping frequency, indicating strong member engagement rather than reliance on ticket inflation.
Gross margin percentage expanded 20 basis points to 11.12%, or 11 basis points excluding gasoline deflation, driven by improvements in fresh foods and benefits from the co-branded credit card program.
Bearish points
SG&A expenses as a percentage of sales increased 11 basis points to 9.25%, or 3 basis points excluding gasoline deflation, indicating challenges in fully leveraging fixed costs despite revenue growth.
The effective tax rate increased to 25.1% from 24.4%, adversely impacting net income growth despite strong operating performance.
Foreign exchange headwinds reduced net income by $97 million, or $0.22 per diluted share, and negatively impacted net sales by approximately $1.9 billion as the company expands internationally.
U.S. and Canadian operations comprise 86% and 84% of net sales and operating income, creating significant geographic concentration risk. Within the U.S., California alone represents 26% of domestic net sales, further concentrating exposure.
Key highlights
Costco opened 27 new warehouses in fiscal 2025, including three relocations, for a net addition of 24 locations. The company plans to open up to 35 new warehouses in fiscal 2026, including five relocations. Capital expenditures totaled $5.5 billion in 2025, and the company expects to spend $6.0 billion to $6.5 billion in 2026. E-commerce sales grew 16%, consistent with the prior year growth rate. Average ticket increased approximately 1%, while gasoline price deflation of 8% negatively impacted net sales by $2.3 billion, or 93 basis points. The Board of Directors approved a 12% increase in the quarterly cash dividend in April 2025. Share repurchases totaled approximately $903 million at an average price of $957.66 per share, with $1.96 billion remaining under the authorized program. Cash and cash equivalents plus short-term investments totaled $15.3 billion at year-end 2025, up from $11.1 billion in 2024.
Management commentary
Management stated that the most important driver of profitability is increasing net sales, particularly comparable sales. The company emphasized its philosophy of providing members with quality goods and services at competitive prices, focusing on maintaining pricing authority rather than maximizing short-term prices. Management noted that government tariff actions in various countries have affected merchandise costs, stating that higher tariffs are more likely to adversely impact rather than improve results. The company acknowledged that its gasoline business enhances warehouse traffic but operates at lower gross margins. Management stated that it believes current cash, investment positions, and operating cash flow, along with existing credit capacity, will be sufficient to meet liquidity and capital requirements for the foreseeable future. Management highlighted that the membership format is integral to the business and profitability, with growth in the membership base, penetration of Executive memberships, and high renewal rates materially influencing profitability. The company noted that as the warehouse base grows and desirable sites become more difficult to secure, square footage growth becomes a comparatively less substantial component of overall growth.
What to watch next
Investors should monitor:
Fiscal 2026 warehouse expansion plan of up to 35 new openings (including five relocations) and capital expenditures of $6.0 billion to $6.5 billion, which will influence near-term margin pressure and longer-term market penetration.
Sustainability of the 6% comparable sales growth trend, particularly the balance between shopping frequency gains and average ticket growth, as member engagement drives profitability.
Trajectory of SG&A expense leverage, especially whether the company can reverse the 11 basis points of deleverage experienced in 2025 as it scales operations.
Impact of tariff policies and foreign currency fluctuations on merchandise costs and international profitability, particularly given 27% of net sales coming from international operations.
Membership renewal rates as online and digital promotion memberships, which renew at slightly lower rates, enter the trailing renewal calculation and potentially affect the 92.3% U.S./Canada and 89.8% worldwide renewal rates.
This summary is based solely on excerpts from the company's Form 10-K filing.