Business Context and Reporting Period
Company: Costco Wholesale Corporation
Filing Type: Form 10-Q (Unaudited)
Reporting Period: 12 weeks ended May 11, 2025 (Fiscal Q3 2025) and 36 weeks ended May 11, 2025.
Operations: Operates 905 membership warehouses worldwide as of May 11, 2025, including 624 in the U.S. and 281 internationally. The company operates on a 52/53-week fiscal year ending the Sunday closest to August 31.
Key Financial Metrics
| Metric (in millions) | Q3 2025 (12 Weeks) | Q3 2024 (12 Weeks) | YTD 2025 (36 Weeks) | YTD 2024 (36 Weeks) |
|---|---|---|---|---|
| Total Revenue | $63,205 | $58,515 | $189,079 | $174,756 |
| Net Sales | $61,965 | $57,392 | $185,480 | $171,440 |
| Membership Fees | $1,240 | $1,123 | $3,599 | $3,316 |
| Operating Income | $2,530 | $2,197 | $7,042 | $6,243 |
| Net Income | $1,903 | $1,681 | $5,489 | $5,013 |
| Diluted EPS | $4.28 | $3.78 | $12.34 | $11.27 |
| Gross Margin % | 11.25% | 10.84% | 11.12% | 10.89% |
| Operating Cash Flow (YTD) | $9,468 (2025) vs $8,381 (2024) | |||
| Cash & Equivalents | $13,836 (May 11, 2025) | |||
| Long-Term Debt | $5,717 (May 11, 2025) |
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 8% in Q3 2025 compared to Q3 2024, driven by an 8% increase in net sales and a 10% increase in membership fees.
- Comparable Sales: Comparable sales increased 6% in Q3 2025, driven by a 5% increase in shopping frequency and a slight increase in average ticket. Excluding foreign currency and gasoline price impacts, comparable sales grew 8%.
- Profitability: Net income rose 13% to $1.903 billion. Gross margin percentage expanded 41 basis points to 11.25%, aided by performance in fresh foods and foods/sundries, partially offset by a LIFO charge and lower gasoline prices.
- Expenses: SG&A expenses as a percentage of net sales increased 20 basis points to 9.16%, influenced by investments in employee wages and a one-time expense for increased employee vacation.
- Foreign Exchange: Changes in foreign currency rates negatively impacted net sales by approximately $699 million and net income by $35 million in Q3 2025.
Guidance, Outlook, and Risks
- Capital Expenditures: The company spent $3.532 billion on capital expenditures in the first 36 weeks of 2025 and intends to spend slightly over $5.0 billion for the full fiscal year 2025.
- Warehouse Expansion: Opened 17 new warehouses (including 2 relocations) in the first 36 weeks of 2025; plans to open 10 additional new warehouses (including 1 relocation) by the end of fiscal 2025.
- Dividends: Declared a quarterly cash dividend of $1.30 per share (a 12% increase from the prior year), paid on May 16, 2025.
- Share Repurchases: Repurchased 215,000 shares in Q3 2025 at an average price of $976.71. $2.242 billion remains available under the $4.0 billion authorization expiring in January 2027.
- Risks and Contingencies:
- Legal Proceedings: Ongoing litigation includes class actions regarding wage/hour violations, privacy law violations (pixel trackers), and opioid abuse impacts. The company does not believe these will have a material adverse effect on financial position.
- Regulatory: An agreement was reached to settle an EPA investigation regarding misbranded devices for an immaterial amount.
- Market Risks: Exposure to foreign currency fluctuations, interest rates, and geopolitical conditions including tariffs.
Investor Verification Checklist
- Membership Renewal Rates: Verify the sustainability of the 92.7% renewal rate in the U.S. and Canada and 90.2% worldwide, noting the negative impact from digital promotion sign-ups.
- Gasoline Price Sensitivity: Monitor the impact of gasoline price deflation on net sales and gross margin percentage, as lower prices reduced sales volume impact in this period.
- Foreign Currency Impact: Assess the continued negative effect of foreign exchange rates on international segment performance and consolidated net income.
- Capital Allocation: Track the execution of the $5.0 billion capital expenditure plan and the pace of share repurchases under the remaining $2.242 billion authorization.
- Legal Exposure: Monitor developments in the privacy class actions (Castillo et al.) and wage/hour litigation for potential accruals or settlements.