Why did Costco's operating expenses rise in Q1 2025?

Costco's operating expenses rose in Q1 2025 due to several key factors: 1. **Increased Sales and Operations Scale**: Costco reported a 9.1% increase in net sales for Q2 2025, reaching $62.53 billion. This growth in sales is a result of strong performance across the company, including substantial increases in the North American market. As sales rise, operating expenses such as rent, utilities, and maintenance costs associated with running more stores and warehouses are likely to increase to support the growing demand. 2. **New Warehouse Openings and Expansion**: Costco plans to open 28 new warehouses in fiscal year 2025, including 25 net new buildings. The expansion of its global footprint to meet growing consumer demand naturally leads to higher operating expenses, particularly in the initial phases of setting up new facilities and hiring staff. 3. **Employee Wage Increases**: The company has implemented a new employee agreement that includes wage increases. These increased labor costs are reflected in the operating expenses as Costco commits to providing industry-leading pay and benefits to its workforce. 4. **Foreign Exchange Fluctuations**: Despite the challenges posed by foreign exchange fluctuations, Costco's international operations, particularly in Canada, delivered record results on a constant currency basis. This success demonstrates the company's effective global strategy, which may come with increased operating expenses related to adapting to local markets and currencies. In summary, Costco's operating expenses rose in Q1 2025 due to increased sales, new warehouse openings, employee wage increases, and foreign exchange fluctuations, among other factors. These expenses are necessary to support the company's growth and strategic expansion efforts.