Costco Wholesale Corporation: 2025 Fiscal Year 10-K Summary
Business Context and Reporting Period
This summary covers the Annual Report on Form 10-K for Costco Wholesale Corporation for the 52-week fiscal year ended August 31, 2025. Costco operates membership warehouses and e-commerce sites globally, offering a limited selection of nationally-branded and private-label products. As of the reporting date, the company operated 914 warehouses worldwide (629 in the U.S., 110 in Canada, and 175 in Other International markets). The company reported a total of 81.0 million paid members globally, with a worldwide renewal rate of 89.8%.
Key Financial Metrics
| Metric | Fiscal 2025 | Fiscal 2024 | Change |
|---|---|---|---|
| Total Revenue | $275,235 million | $254,453 million | +8.2% |
| Net Sales | $269,912 million | $249,625 million | +8.1% |
| Membership Fee Revenue | $5,323 million | $4,828 million | +10.3% |
| Gross Margin | $30,026 million | $27,267 million | +10.1% |
| Gross Margin % | 11.12% | 10.92% | +20 bps |
| Operating Income | $10,383 million | $9,285 million | +11.8% |
| Net Income | $8,099 million | $7,367 million | +9.9% |
| Diluted EPS | $18.21 | $16.56 | +10.0% |
| Operating Cash Flow | $13,335 million | $11,339 million | +17.6% |
| Cash & Equivalents | $14,161 million | $9,906 million | +43.0% |
| Long-Term Debt | $5,713 million | $5,794 million | -1.4% |
Material Changes vs. Prior Period
- Sales Growth: Net sales increased 8% driven by a 6% increase in comparable sales (5% higher shopping frequency and 1% higher average ticket) and sales from 24 net new warehouses opened in 2025.
- Membership: Membership fee revenue grew 10% due to new sign-ups and fee increases implemented in September 2024. Executive member sales penetration reached 73.6% of worldwide net sales.
- Margin Expansion: Gross margin percentage increased 20 basis points to 11.12%. Excluding the impact of gasoline price deflation, the increase was 11 basis points, driven by fresh foods and the co-branded credit card program. A $142 million LIFO charge partially offset gains.
- Expense Management: SG&A expenses as a percentage of net sales increased 11 basis points to 9.25%, primarily due to warehouse operations and other businesses. Excluding gasoline price deflation, the increase was 3 basis points.
- Capital Allocation: The company spent $5,498 million on capital expenditures in 2025. Dividends declared totaled $2,183 million ($4.92 per share), excluding the special dividend paid in 2024. The quarterly dividend was increased by 12% to $1.30 per share in April 2025.
Guidance, Outlook, and Risks
- Capital Expenditure Guidance: Management intends to spend between $6,000 million and $6,500 million on capital expenditures in fiscal 2026.
- Expansion Plans: The company plans to open up to 35 new warehouses (including five relocations) in fiscal 2026.
- Key Risks:
- Geographic Concentration: U.S. and Canadian operations comprised 86% of net sales and 84% of operating income in 2025. California alone represented 26% of U.S. net sales.
- Supply Chain & Inflation: Risks include disruptions in merchandise distribution, supplier availability, and the inability to pass cost increases to members without impacting demand.
- Cybersecurity: The company faces evolving threats to IT systems and data privacy. While no material incidents were reported, the company is actively sourcing a replacement for its Chief Information Security Officer (CISO).
- Legal Proceedings: Ongoing litigation includes class actions regarding wage and hour laws, opioid abuse impacts, and privacy law violations (pixel trackers). Management does not believe these will have a material adverse effect on financial position.
Investor Verification Checklist
- Membership Renewal Rates: Verify the sustainability of the 89.8% worldwide renewal rate, noting the negative impact of higher online membership sales which renew at slightly lower rates.
- Gasoline Price Sensitivity: Monitor the impact of gasoline price fluctuations on net sales and gross margin percentage, as lower prices negatively impacted sales by $2,329 million in 2025.
- Capital Expenditure Execution: Track progress against the $6.0–$6.5 billion capex guidance for 2026 and the ability to secure sites for 35 new warehouse openings.
- Executive Compensation & Retention: Review the impact of the new three-year vesting schedule for RSUs on future compensation expenses and employee retention.
- Legal Exposure: Monitor the status of the consolidated privacy class action (Castillo v. Costco) and the False Claims Act investigation regarding prescription medications.