To The Moon

$Costco(COST)$ is scheduled to report its third quarter fiscal 2025 earnings after the market closes on Thursday, 29 May 2025.

Revenue: Analysts generally expect Costco to report revenue of approximately $63.1 billion for Q3 fiscal 2025. This would represent a year-over-year increase of about 7.8%.

Earnings Per Share (EPS): The consensus analyst estimate for Q3 fiscal 2025 EPS is around $4.23 to $4.25 per share, indicating a projected growth of about 12% year-over-year.

Comparable Sales: Investors will be closely watching comparable sales growth, a key metric for retailers.

Costco Net Sales of $21.18 billion for April 2025 Already Reported

Costco already reported net sales of $21.18 billion for April 2025 (part of Q3), an increase of 7.0% year-over-year. For the first 35 weeks of the fiscal year (which includes most of Q3), net sales reached $180.05 billion, an 8.2% gain compared to the same period last year.

Comparable sales in the U.S. for April were up 5.2%, and e-commerce sales increased by 12.6% for the month.

Costco (COST) Last Positive Earnings Call Saw Share Price Declined By 1.77%

Costco had a positive earnings call on 06 March 2025 which saw its share price declined by 1.77% since.

The earnings call reflected strong performance in sales, e-commerce growth, and membership fee income, alongside strategic expansion plans. However, challenges from foreign exchange, tariff uncertainty, and increased supply chain costs were noted. Despite these challenges, the overall sentiment leans positive due to robust sales performance and strategic growth initiatives.

Costco (COST) Guidance

During Costco's fiscal second quarter 2025 earnings call, the company provided a comprehensive overview of its performance and future guidance. Net income for the quarter was reported at $1.788 billion, equating to $4.02 per diluted share, marking an increase from the previous year's $1.743 billion or $3.92 per diluted share. Notably, net sales rose by 9.1% to $62.53 billion. Comparable sales in the US increased by 8.3%, while Canadian and other international sales grew by 4.6% and 1.7%, respectively, with stronger growth when adjusted for gas deflation and foreign exchange. E-commerce sales were particularly robust, up 20.9%.

Costco plans to open 28 new warehouses in fiscal year 2025, expanding its global footprint. The company is also extending gas station hours in North America and implementing a new employee agreement that includes wage increases. Despite foreign exchange headwinds and potential tariff impacts, Costco remains focused on delivering value to its members, with membership fee income growing by 7.4% to $1.193 billion. The renewal rate for US and Canada memberships stood at 93%, with executive memberships representing 47.1% of paid members and generating 73.8% of sales.

What to Watch for in the Earnings Report (May 29, 2025) And Recent Trends

Strong Membership Model: Costco's membership-based model continues to be a significant strength. They reported a 93% membership renewal rate in the U.S. and Canada in the previous quarter, indicating strong customer loyalty. Recent membership fee hikes are also expected to contribute to fee income.

Membership fee income increased by $82 million or 7.4% year over year, with a growth of 9.4% excluding FX.

Consistent Growth: Costco has generally demonstrated consistent revenue growth and profitability. In Q2 fiscal 2025, sales increased 9.1% year-over-year, and comparable sales were up 8.3%.

Net sales for the second quarter were $62.53 billion, an increase of 9.1% from $57.33 billion in the second quarter last year. US comparable sales were up 8.3% or 8.6% excluding gas deflation.

E-commerce Expansion: The company has seen robust growth in its e-commerce sales, with a 16.3% year-to-date increase in comparable e-commerce sales as of April 2025. This shows their ability to adapt to changing consumer shopping habits.

E-commerce comp sales were up 20.9% or 22.2% adjusted for FX, showing significant strength in digital sales.

Store Expansion: Costco is actively expanding its store network, with 28 new store openings planned for fiscal 2025, which should contribute to future growth.

Projected 28 new openings during fiscal year 2025, including 25 net new buildings.

Macroeconomic Headwinds: While Costco generally performs well in various economic conditions, the company has acknowledged potential headwinds from unfavorable foreign exchange rates and new import tariffs. Approximately one-third of merchandise sold in U.S. Costco stores is imported, with about half of that coming from China, Canada, and Mexico. Management has stated their goal is to minimize the impact of related cost increases on members.

Canada and other international business delivered record results on a constant currency basis, despite FX fluctuations.

Shareholder Returns: Costco recently announced a 12% increase in its quarterly dividend to $1.30 per share, reinforcing investor confidence in its financial strength.

Implemented a new employee agreement with wage increases, reflecting a commitment to industry-leading pay and benefits.

Analyst Sentiment: The consensus analyst rating for Costco is generally "Moderate Buy" or "Buy," with an average price target that suggests potential upside from current levels.

Impact of Tariffs: Any specific commentary from management regarding the actual or anticipated impact of new tariffs on their cost of goods and pricing.

Guidance for Q4 and Full Fiscal Year 2025: This will be crucial for investor outlook, as it will provide a glimpse into management's expectations for the remainder of the fiscal year.

Inventory Levels: Management of inventory will be important to ensure efficient operations and avoid markdowns.

Key Activities and News during Fiscal Q3 2025 (roughly February to May 2025)

Sales Performance (Monthly Updates): Costco provides monthly sales updates, which offer a good indication of their performance throughout the quarter.

February 2025 Sales (reported in early March): Costco reported strong net sales growth of around 9% for January 2025 (part of Q2, but indicates momentum).

March 2025 Sales (reported in early April): Costco reported net sales of $21.46 billion for the five weeks ended April 7, 2025, an increase of 9.4% from the prior year. Comparable sales in the U.S. were up 7.7%, and e-commerce sales jumped 28.3%.

April 2025 Sales (reported in early May): Costco reported net sales of $21.18 billion for the four weeks ended May 5, 2025, an increase of 7.0% from the prior year. U.S. comparable sales were up 5.2%, and e-commerce sales increased by 12.6%.

Dividend Increase: On April 16, 2025, Costco announced an increase in its quarterly cash dividend from $1.16 to $1.30 per share. This 12% hike signals confidence in their financial health and commitment to shareholder returns.

Membership Model Strength: Throughout the quarter, analysts continued to highlight the resilience of Costco's membership-based model. High renewal rates (around 93% in the U.S. and Canada in the previous quarter) indicate strong customer loyalty, which is a key driver of consistent revenue and profitability.

Store Expansion: Costco is actively expanding its store footprint globally. They have plans for 28 new store openings in fiscal year 2025, contributing to long-term growth.

E-commerce Momentum: The company has sustained robust growth in e-commerce, showing their ability to capture online consumer spending, which is crucial in the evolving retail landscape.

Macroeconomic Considerations: Management has reiterated awareness of macroeconomic headwinds, including potential impacts from foreign exchange rates and new import tariffs (especially on goods from China, Canada, and Mexico, which constitute a significant portion of their imported merchandise). They aim to minimize the impact on members.

Analyst Sentiment and Expectations: Leading up to the Q3 earnings report, analysts are generally positive, with a "Moderate Buy" consensus rating. They expect:

Revenue: Around $63.1 billion (an increase of about 7.8% year-over-year).

EPS: Approximately $4.23 to $4.25 per share (around 12% year-over-year growth).

There has been some discussion about whether Costco will announce a membership fee increase, which is typically done every 5-6 years, but no official announcement has been made during Q3 2025.

Costco (COST) Price Target

Based on 31 analysts from Tiger Brokers offering 12 month price targets for Costco in the last 3 months. The average price target is $1,067.88 with a high forecast of $1,205.00 and a low forecast of $890.00. The average price target represents a 5.89% change from the last price of $1,008.50.

Technical Analysis - Exponential Moving Average (EMA)

Costco's stock has performed well year-to-date. Strong comparable sales growth, especially in the core U.S. market and e-commerce, would be viewed positively.

But the technicals is showing signs of declining momentum from the RSI, and Costco seem to be defending the 26-EMA, but any more decline might threaten this level. I think the tariffs impact might continuing to be a headwinds to Costco.

So we might want to look at Costco differently as consumer focus with membership-based model might give different results.

Summary

During Q3 2025, Costco demonstrated continued strong sales momentum, particularly in e-commerce, and reinforced its commitment to shareholders through a dividend increase. The underlying strength of its membership model remains a core competitive advantage.

I think as investors we need to watch the full Q3 earnings report on 29 May closely for definitive figures and any updated guidance regarding tariffs and future outlook.

Appreciate if you could share your thoughts in the comment section whether you think Costco could overcome the headwinds brought by tariffs with its competitive advantage with stronger membership growth.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.