Costco Shares Tumble Amid Unmet Profit Expectations Despite Operational Growth

Costco has recently faced turbulence in its stock price and operational results. On March 10, shares of Costco fell by 3.10%, marking a three-day decline totalling 10.82%, hitting a low not seen since January 2025. This drop correlates with the financial results released for the second quarter of fiscal year 2025, which showed profit figures below expectations.

During the company's recent quarterly earnings call, Costco reported a net profit of $17.88 billion and diluted earnings per share of $4.02, showing growth compared to the previous year when earnings were boosted by a significant tax benefit. Despite currency exchange fluctuations adversely affecting international profits, Costco achieved a respectable 12.3% increase in operating profit year-on-year.

Costco’s sales data also highlighted a robust business operation with net sales growth of 9.1% to $625.3 billion compared to last year. Comparable sales improved by 6.8%, buoyed by a 20.9% spike in e-commerce sales. The company is confident in future growth plans, including the opening of numerous new warehouses, with four new locations planned in the United States alone soon, underscoring its ambition to expand its footprint.

Operational strategies were key topics during the call, with discussions on tariffs and supply chain dynamics. With tariffs potentially affecting import costs—approximately one-third of U.S. sales are from imports—the company aims to maintain value for members without significant price shifts. The strategy involves leveraging global supply chains and seeking alternatives where necessary, to mitigate any negative impact.

Costco executives demonstrated vigilance regarding customer behavior amid economic uncertainty. Although the inflation impact is noted, no drastic changes in customer spending patterns were reported. Durable goods continue to see steady interest, while the non-essential markets remain stable despite fluctuating consumer electronics performance.

In terms of internal cost considerations, Costco acknowledged the rise in operational costs, particularly employee wages, and indicated plans to offset these through technological improvements and operational efficiency, thus protecting its margin while continuing to invest in workforce welfare.