Costco Wholesale reported fiscal third-quarter results that surpassed Wall Street expectations, underscoring the resilience of American consumers who continue to prioritize value in a high-cost environment. The warehouse club operator posted net sales of $69.15 billion for the 12 weeks ended May 10, a year-over-year increase of 11.6%, comfortably above the consensus estimate of $69.81 billion compiled by LSEG.
The strong performance comes as households grapple with elevated fuel prices above $4 per gallon and persistently high food costs. This backdrop has driven shoppers toward retailers that can demonstrate clear savings, benefiting Costco's paid-membership model similarly to Walmart's value proposition. Walmart CEO John Furner recently noted that US shoppers are "feeling some pressure" and seeking value, a sentiment that also plays to Costco's strengths.
Net income rose to $2.19 billion, or $4.93 per diluted share, from $1.90 billion, or $4.28 per share, in the same period last year. Membership fees, a key profit driver, increased to $1.37 billion from $1.24 billion, reflecting the company's ability to maintain its loyal customer base.
Comparable sales, which include stores and digital channels open at least a year, climbed 9.8%. Adjusted comparable sales, excluding the impact of gasoline price changes and currency fluctuations, rose 6.6%, while US adjusted comparable sales advanced 6.8%, exceeding the 6.13% average estimate.
Digital sales remained a significant growth engine, with digitally enabled comparable sales jumping 21.5%. E-commerce site and app traffic increased 37%, with top growth categories including pharmacy, gold and jewelry, home furnishings, tires, and housewares. This digital momentum highlights Costco's successful omnichannel strategy.
The membership engine continues to perform well. Paid memberships rose 4.1% to 82.9 million, total cardholders reached 148.5 million, and the worldwide renewal rate stood at 89.7%. In the US and Canada, where the model is most mature, renewal rates were 92.2%. These metrics underscore the strong loyalty and recurring revenue that underpin Costco's business.
Despite the positive results, the quarter was not without challenges. Gross margin slipped to 11.04%, down 21 basis points from a year earlier, while selling, general and administrative expenses rose 20 basis points. The company also flagged risks including tariffs, global conflicts, energy and commodity costs, wages, and consumer spending that could affect future performance.
Costco continues to emphasize its value proposition, lowering everyday prices on several Kirkland Signature products such as crispy wings, milk chocolate almonds, golf balls, and king sheets. This strategy reinforces why the chain's value pitch resonates when shoppers are financially stretched.
The company now operates 931 warehouses, including 639 in the US and Puerto Rico, with e-commerce sites across multiple countries. Shares closed down 0.85% at $995.20 but traded up 0.35% in extended trading. The stock has been near its 52-week high of $1,096.50, trading at elevated earnings multiples, which has led some analysts to rate it a "Hold."
