Costco (COST -0.06%) reported earnings last week that caused the stock to dip around 3%. Overall, I think the stock is still a buy, with a few main factors going into that stance.
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Good numbers
Costco posted net sales of $84.43 billion for the 16‑week quarter (up 8% year over year) and total revenue of $86.16 billion (which includes membership fees). Net income came in at $2.61 billion, or $5.87 in earnings per diluted share, against $2.35 billion and $5.29 per share last year. Earnings per share beat expectations of $5.80 per share, and top‐line growth slightly outpaced expectations with revenue of $86.16 billion against estimates of $86.06 billion.
For the full fiscal year 2025, Costco posted net sales of about $269.9 billion versus $249.6 billion in the year prior, and diluted EPS of $18.21 versus $16.56 for fiscal 2024.
Key trends behind the strength
Comparable sales for the fourth quarter were strong. Adjusted U.S. sales for the fourth quarter increased 6%, while Canada increased by a strong 8.3%. For the rest of the world, comps were up 7.2%. For the company as a whole, this adds up to 6.4% for the quarter. On an adjusted 52-week basis, total comp sales increased 7.6%.
Perhaps the most encouraging piece of the puzzle is Costco's rising online business. Adjusted comp sales for e-commerce increased a whopping 16.1% over the 52 week period.
Costco's membership model is often under appreciated as a durable revenue moat. In Q4, the company recorded $1.72 billion in membership fees compared to $1.51 billion last year; a 14% increase.
Costco's free cash flow remains sturdy, enabling it to fund expansion, pay dividends, and buy back stock without leaning on debt. Over the fiscal year, operating cash inflows were $13.34 billion. In all, net cash flow increased $4.25 billion. Costco is being extremely disciplined with capital. Total cash/equivalents increased to $14.16 billion compared to $9.9 billion in the prior year.
Costco's strength is especially meaningful given headwinds: inflation, tariff pressures, and consumer belt-tightening. Yet value demand has arguably played to Costco's strengths. Reuters observed that consumers are leaning into cheaper essentials, and Costco's commitment to keeping prices low (particularly on staples like butter and eggs) seems to be attracting traffic. Costco appears to be reinvesting a portion of its fee hikes into sharpening pricing competitiveness, creating a good dynamic for members and shareholders.
Risks, but not fatal ones
Of course, it's not all sunshine. Some things to keep in mind:
While 6.4% comps is good, it fell just short of some forecasts, and marked the second quarter in a row with slowing comp sales. If input costs, wages, or tariff pressures worsen, Costco may need to absorb some of the costs or sacrifice margin, especially in non-food or discretionary categories.
There's also the need to consider that this is a mature company. The ability to open new warehouses will slow over time in mature markets, and future growth will lean increasingly on productivity, e‑commerce, and membership strategies.
Recap
Investors have a lot of reasons to remain bullish on Costco over the long run. Comp sales might have slowed over the last two quarters, but the ability to grow comps, with an especially likable run in e-commerce in what has been a more challenging environment for consumers, makes Costco seem like a good buy-and-hold stock.
The company has a strong capital position, and can reinvest in the business or weather any slower patches in the coming quarters.
So while the headline beat was modest, it masks a performance that underlines Costco's defensive strength and upside. All of that is why last week's earnings have me more bullish than neutral -- and why I'm increasingly confident that, even in choppy markets, Costco is quietly a valuable asset to a portfolio.
