--- title: "Costco: How was the excellent performance achieved?" description: "Q1 2025 Earnings Call Minutes" type: "topic" locale: "en" url: "https://longbridge.com/en/topics/26075927.md" published_at: "2024-12-14T08:21:56.000Z" author: "[Dolphin Research](https://longbridge.com/en/news/dolphin.md)" --- # Costco: How was the excellent performance achieved? **Below is the transcript of the** $Costco Wholesale(COST.US) **Q1 FY2025 earnings call. For earnings analysis, please refer to《**[**Costco: The True 'Retail King' That Defies Cycles**](https://longportapp.cn/zh-CN/topics/26075286) **1\. Key Earnings Highlights:** **2\. Detailed Earnings Call Content** **2.1. Key Management Discussion:** **Business Growth Highlights** \- Opened **7 new warehouses** in Q1 FY2025, including 1 relocation, net increase of 6, with 4 outside the U.S. \- Opened **the 897th warehouse** in California the day before Thanksgiving, achieving a record $2.9M in opening-day sales. \- Plans to open **29 warehouses** in FY2025, including 3 relocations, net increase of 26, with 10 outside the U.S. **Core Merchandise Sales** **\- Fresh Foods:** Mid-single-digit comp sales growth in Q1, leading core merchandise. **\- Meat Department:** Double-digit growth, with demand for both premium and value cuts. **\- Non-Food:** High-single-digit growth despite calendar shifts. Categories like gold jewelry, gift cards, home goods, and sporting goods saw double-digit growth. Added premium brands like Peloton and Wrangler. **\- Grocery & Sundries:** Mid-single-digit comp growth, led by refrigerated/frozen foods. Strong momentum for international items like pork dumplings and hotpot beef. Kirkland Signature grew faster than overall sales, with price cuts on items like peanut butter. **Ancillary Businesses** **\- Pharmacy:** Strongest sales growth, leveraging tech like new Rx inventory software and Instacart delivery. **\- Food Court & Optical:** Performed well this quarter. **\- Gasoline:** Low-double-digit sales decline due to lower prices. **\- Costco Travel:** Unique member value, with users spending ~2x more. Shared fun stats (e.g., rentals could fill U.S. parking lots 8.5x). **Digital & E-Commerce** \- Tech roadmap progress, e.g., warehouse inventory checks via app. U.S. app downloaded **2.9M times** in Q1 (~42M total). \- E-commerce traffic, conversion, and AOV rose YoY, driving comp sales. Hardware, sporting goods, and home goods saw double-digit online growth. \- Costco Logistics excelled; Costco Next set records during Thanksgiving week. **Retail Media** \- Completed first targeted media campaign with a major CPG partner, achieving 2-3x ROAS. Working with 25+ vendors on next wave. **Net Income** \- Q1 FY2025: **$1.798B** ($4.04 diluted EPS) vs. $1.589B ($3.58) YoY. \- Includes $100M tax benefit ($0.22 EPS) from stock comp vs. $44M ($0.10) YoY. \- Excluding discrete taxes, **net income and EPS** grew **9.9%** and **9.8%**, respectively. **2.2. Q&A Highlights** **Q: Consumer health & seasonal inventory (e.g., apparel)? Non-essential category share?** A: **Consumers prioritize novelty, quality, and value.** Non-food categories like jewelry and gift cards grew double-digits. Meat/produce sales strong, with share gains in most categories. **Q: Traffic/basket drivers? Retail media upside?** A: **Traffic/frequency solid;** U.S. basket size +~2% ex-fuel. Retail media is incremental, with agency interest. **Q: Core margin drivers? Price reinvestment vs. other investments?** A: **Food flat, non-food down slightly, fresh up—net +3bps.** Hardware includes storage, tools, etc. Will balance price investments. **Q: Online vs. offline member renewal? Costco Next impact?** A: Digital recruits renew slightly below historical rates. **Renewal data lags 18 months.** Next enhances member relationships. **Q: Stock split? Tariff views?** A: **No split planned but evaluating.** Tariff timing/scope uncertain; past mitigation includes sourcing shifts. **Q: CapEx outlook?** A: **Gradual increases reflect growth** (new warehouses, tech). Prioritize warehouse quality. **Q: Int'l pipeline? Price vs. other investments?** A: **~30 warehouses/year, mostly ex-U.S.** Fee reinvestment balances price cuts, wages, Kirkland innovation. **Q: Core margin +17bps ex-gas drivers?** A: **Gas hurt by Mideast; e-com/credit card benefits offset.** **Q: U.S. growth runway amid competition?** A: New warehouses (e.g., Pleasanton) drive incremental visits. Focus on member experience. **Q: E-com penetration (with Instacart/Uber)? Kirkland share?** A: **E-com ~7-8% of sales; >10% with others ex-gas.** U.S. Kirkland ~33%, growing faster. **Q: Traffic drivers?** A: Cross-functional: buying, ops, pharmacy/food court traction. **Q: Competitive response to fee hikes/Scan & Go?** A: **Biggest competitor is ourselves.** Scan & Go not a focus now. **Q: Category expansion/low-margin items?** A: Always exploring (e.g., caskets, gas). Benefits include traffic/cross-sell. **Q: High-income wallet share? 2% rebate +5bps?** A: Opportunity via brands like Kirkland. Rebate growth offsets quarterly. **Q: Instacart/Uber learnings?** A: Changed habits; growth at/above digital pace. **Q: Teamsters negotiations?** A: 40-year fair-dealing record; aim for timely agreement. **Q: Int'l trends?** A: Momentum solid; share gains continue. **Q: E-com UX vs. peers? Digital member growth?** A: Outpaced U.S. e-com growth. Improving search/app inventory. Digital recruits less aware of executive benefits. **** **Disclosures:**[**Dolphin Research Disclaimer**](https://support.longbridge.global/topics/misc/dolphin-disclaimer) ### Related Stocks - [COST.US - Costco Wholesale](https://longbridge.com/en/quote/COST.US.md) --- > **Disclaimer**: This article is for reference only and does not constitute any investment advice.