Costco Wholesale Corporation Q4 FY2025 earnings call

• Warehouse openings: Opened 10 new warehouses in Q4, 27 in fiscal year 2025, with plans to open 35 in fiscal year 2026 (5 of which are relocations).
• Financial highlights: Net sales for fiscal year 2025 were just under $270 billion, up over 8% y/y; e-commerce sales up over 15%; record gas volumes.
• Milestones: 40th anniversary of $1.50 hot dog combo; Kirkland Signature's 30th anniversary; rollout of Coca-Cola for the hot dog combo to all food courts.
• Member benefits: Executive member exclusive hours, $10 Instacart credit for purchases >$150, enhanced checkout technology in US warehouses.
• Digital: E-commerce traffic up 27%, sales growth in multiple categories; focus on personalized digital experiences and retail media.

In the fourth quarter, net sales were $84.43 billion, an increase of 8% from the prior year. E-commerce sales exceeded $19.6 billion, up over 15%. Membership fee income was $1.72 billion, a year-over-year increase of $212 million or 14%. Gross margin rate was 11.13% in Q4, up 13 basis points from last year. Core on core margins were up 29 basis points year over year, with fresh, foods and sundries, and nonfoods all contributing to the increase. Executive members represented 47.7% of paid members and 74.2% of worldwide sales.

• Plan to open 35 warehouses in fiscal year 2026, including 5 relocations.
• Expect continued growth in membership base and e-commerce.
• Capital expenditure: Q4 2025 capital expenditure was ~$1.97 billion, full-year 2025 was ~$5.5 billion; expect capital expenditure growth in fiscal year 2026 to support warehouse expansion, remodels, and manufacturing investments.

• Tariffs and inflation: Impact on costs, with efforts to mitigate through sourcing, consolidation, and changing assortments.
• Membership renewal rates: Affected by higher number of online sign-ups, though viewed as a net positive for growing the membership base.
• Competition: In e-commerce and retail sectors, requiring ongoing vigilance and adaptation.

Q: Inflation outlook and impact on gross margin, especially nonfoods?

A: Gary Millerchip explained inflation is low to mid single-digit, with nonfoods having seen prior deflation turning to inflation, and teams managing through sourcing and assortment changes.

Q: Tariffs impact and future outlook, including member value protection?

A: Gary Millerchip and Ron Vachris discussed multipronged approach to mitigate tariffs, with focus on sourcing, consolidation, and assortment changes to protect member value.

Q: Membership growth components and US household potential?

A: Gary Millerchip emphasized focus on member value driving growth, with opportunities in international markets and organic growth through word-of-mouth.

Q: Digital roadmap low-hanging fruit and Kirkland Signature's future?

A: Gary Millerchip highlighted personalized digital experiences as a priority, with Kirkland Signature continuing to focus on quality, value, and innovation to meet member needs.