Costco (COST) Earnings Preview: Value Proposition Likely Drives Market Share Gains Amid High Expectations
2min read Costco is set to release its fiscal first-quarter 2025 earnings after the market closes, with investors anticipating another strong performance from the membership warehouse giant. The company is expected to report earnings per share of $3.79 on revenue of $66.5 billion, according to consensus estimates.
While the broader retail sector faces mixed consumer spending trends, Costco’s value-oriented model positions it as a standout amid economic uncertainties.
In a retail environment where consumers are increasingly prioritizing value and necessities, Costco has continued to gain market share, benefiting from its competitive pricing and bulk purchasing options. Recent earnings reports from Walmart and Target underscored this trend, with Walmart reporting strength in value-driven categories, while Target struggled with slower discretionary spending.
Costco’s adjusted comparable sales growth for the quarter highlights its resilience. The company reported 8.9 percent growth in September, followed by 6.5 percent in October and 4.9 percent in November.
September’s results were bolstered by stockpiling ahead of Hurricane Helene, which likely dampened October’s growth due to demand pull-forward. While November’s comps moderated, they remain solid, considering the strong year-ago performance.
The first quarter ends before the critical Black Friday period, meaning Costco’s results will primarily reflect early holiday shopping trends. Despite this timing, its robust performance in discretionary categories such as appliances, jewelry, and home furnishings suggests Costco remains a go-to destination for both essentials and higher-ticket items.
This is further supported by strong e-commerce growth in the prior quarter, which jumped 19.5 percent. However, e-commerce comps dipped into negative territory at -2.5 percent in November, reflecting tough comparisons against a 9.9 percent gain in the same period last year.
Costco’s recent membership fee hike, effective September 1, 2024, is another factor to watch. Although this is the first increase in seven years, the financial impact on first-quarter results is expected to be minimal due to deferred accounting. The full benefit will likely materialize in the second half of the year and into fiscal 2026, providing a future earnings tailwind.
With Costco’s stock up over 50 percent year-to-date and hovering near all-time highs, the company faces a high bar to meet investor expectations. While its value-driven model and strong market positioning should support solid results, any perceived shortfall or guidance below expectations could trigger a sell-the-news reaction.
Looking ahead, Costco’s commentary on holiday season trends and its outlook for discretionary spending will be closely watched. Investors will also seek updates on its membership renewal rates, which have historically been a key driver of the company’s recurring revenue.
In summary, Costco’s Q1 earnings report is expected to reaffirm its position as a leader in the retail sector. The company’s ability to attract value-conscious consumers, combined with strategic pricing initiatives like the membership fee hike, underscores its long-term growth potential. However, with high expectations already baked into the stock price, execution will need to be flawless to sustain its upward momentum.
