Earnings Preview: After a strong start to FY25, what’s in store for Costco (COST)

Costco Wholesale Corporation (NASDAQ: COST) is scheduled to report second-quarter results on Thursday, after the closing bell. The store chain is popular among almost all customer demographics — from price-conscious shoppers to high-income households – thanks to its successful membership model and competitive pricing.

The Issaquah-headquartered membership warehouse giant will release its Q2 FY25 earnings report on March 6, at 4:15 pm ET. It has a strong track record of consistently delivering quarterly earnings and revenue growth. Net income exceeded Wall Street’s expectations in each of the trailing six quarters. For the second quarter, analysts estimate a 5% increase in earnings to $4.10 per share. The positive bottom-line forecast reflects an estimated 7.8% increase in Q2 sales to $63.02 billion.

Stock Peaks

Costco’s shares set a new record in mid-February, after gaining steadily since the beginning of the year. While COST has pulled back from its peak, it is regaining strength ahead of the earnings. The stock has gained a whopping 38% in the past twelve months. It has long been a favorite among investors and is likely to remain so in the foreseeable future.

From Costco’s Q1 2025 earnings call:

“As our buyers continue to bring in new and exciting items at great values. Golden jewelry, gift cards, home furnishings, sporting goods, health and beauty aids, luggage, kiosk, and hardware were all up double digits. This quarter, we were able to add several new high-quality brands across a broad range of categories, including Peloton, Wrangler, Springfree Trampolines, and Ruggable. Food and sundries had mid-single-digit comps with our cooler and frozen food departments leading the way.”

Costco enjoys a significant cost advantage by driving high sales volumes. The company’s strategy is to sell its products at discounted prices while keeping margins relatively low. Customers keep coming back to the stores to take advantage of the low prices. Additionally, the high renewal rate of Costco membership generates steady revenues from annual fees. As a result, the company maintains a stable sales performance and drives profitable growth.

Q1 EPS Beats

In the first quarter of fiscal 2025, revenues increased to $62.2 billion from $57.8 billion in the corresponding period last year. Total comparable store sales grew 5.2% during the three months. Net income was $1.80 billion or $4.04 per share in the November quarter, compared to $1.59 billion or $3.58 per share in Q1 2024.

A couple of weeks ago, Costco’s stock crossed the $1,000 mark for the first time, following several months of steady growth. On Friday, COST opened at $1,021.71 and traded slightly higher.