Costco's Q2 2025 Earnings Call: Contradictions on Consumer Behavior, Membership Fees, and International Growth

These are the key contradictions discussed in Costco Wholesale's latest 2025Q2 earnings call, specifically including: Consumer Behavior and Inflation Impact, Membership Fee Increases Strategy, Tariff Management Strategy, and International Growth Potential:



Sales and Membership Growth:
- Costco reported net sales of $62.53 billion for the second quarter of fiscal 2025, an increase of 9.1% from the previous year.
- U.S. comparable sales were up 8.3%, while e-commerce sales increased by 20.9%.
- The growth was driven by a focus on quality, value, and newness, as well as increased membership engagement.

Core Gross Margin and Supply Chain Investments:
- Costco's gross margin rate increased slightly by 5 basis points, with core-on-core margins down by 8 basis points.
- The decrease in core-on-core margins was due to investments in higher inventory and mix changes in nonfood categories.
- To mitigate supply chain unpredictability and potential tariff impacts, Costco increased inventory levels.

International Expansion and Market Performance:
- Sales in the Other International segment saw a sequential slowdown, with comp sales down 0.6%, attributed partly to the Chinese New Year.
- Despite this, Canada and Other International markets still showed strong results, with the Canada comp sales up 4.6%.
- Costco plans to continue expanding internationally, with a focus on Canada, Mexico, Asia, and Europe, leveraging strong profitability in these markets.

Gas Station Strategy:
- Gas comps were negative with low single digits due to a slight decrease in the average price per gallon.
- Costco extended gas station hours to improve customer convenience, which has shown initial positive member reactions.

Membership Fee and Employee Agreements:
- Membership fee income increased by 7.4%, with a recent membership fee increase contributing approximately 3% of the fee income.
- A new employee agreement resulted in a $1 top-of-scale increase, effective in March, with additional increases planned in the following years.
- The agreement reflects Costco's commitment to providing industry-leading pay and benefits for employees.