Can Costco (COST) maintain last year’s momentum in FY25?

Costco Wholesale Corporation (NASDAQ: COST) posted higher quarterly sales and profit consistently in fiscal 2024, with earnings beating estimates every time. The company has a strong track record of performing well in all economic conditions including recessions and booms, thanks to its low prices and constant efforts to improve customer experience.

The positive market sentiment over the company’s financial health was reflected in the performance of its stock throughout the year, with an impressive 50% gain during that period. Last week, Costco’s shares climbed to an all-time high, after staying on the growth path for several months. While Costco’s dividend payout ratio is relatively low, it has impressed shareholders with special dividends in the past.

Estimates

The retail giant, which operates a chain of membership warehouses, will publish results for the first quarter of 2025 on Thursday, December 12, at 4:15 pm ET. It is estimated that the company began the new fiscal year on a positive note, with market watchers predicting a year-over-year increase in Q1 sales and profit. The consensus top-line estimate is $62.05 billion, compared to $57.8 billion in the prior-year quarter. On a per-share basis, net income is expected to increase to $3.80 in Q1 from $3.58 last year.

From Costco’s Q4 2024 earnings call:

“We continue to grow our e-commerce business and Costco Logistics has had a remarkable year. Appliances and Furniture and big and bulky has led the way, and logistics delivered over 4.5 million items this last year, up 29% over the year prior. Improvements in our item assortment, delivery times, and scheduling functionality, all enhance the member experience. We have great momentum with this business and expect big and bulky items will be a key part of our continued progress with e-commerce in the coming year.”

Costco’s unique business model, based on the membership-only warehouse concept, is the main driving force behind its success. Since the lion’s share of the company’s profit comes from membership fees, it passes a significant portion of its profit margins on to shoppers, ensuring high customer loyalty.

Q4 Outcome

In the final three months of fiscal 2024, the company’s revenues increased to $79.70 billion from $78.94 billion in the corresponding period last year. Comparable store sales grew around 5% across all geographical segments, while e-commerce sales increased 18.9%. Net income was $2.35 billion or $5.29 per share in the fourth quarter, compared to $2.16 billion or $4.86 per share in Q4 2023. The bottom line exceeded Wall Street’s estimates.

The value of Costco’s stock has nearly doubled in the past one-and-a-half years. On Monday, it traded lower in the early part of the session, reversing the recent uptrend.