MW Costco says customers could stay cautious due to inflation and tariffs. 'When it rains, it rains on everyone,' CEO says.

By Bill Peters

Retailer reports quarterly results after Walmart recently warned of its first year-over-year decline in quarterly profit in three years

An earlier version of this article misstated Costco's total quarterly revenue figure, which was above analysts' estimates.

Shares of Costco Wholesale Corp. slipped after hours on Thursday, after the membership warehouse retailer reported mixed second-quarter results and warned that shoppers could stay "choiceful" as they navigate higher prices and tariffs.

Still, as more shoppers gravitate to mass retailers to look for bargains, the company said that same-store sales growth for things outside of food was strong, after cost-of-living increases in prior years kept demand subdued for things outside of the basics.

Costco $(COST)$ also said it expects 28 new store openings - three of which would be relocations - for the fiscal year, which is set to run through August. And after extending hours at its gas stations in North America, it said extending store hours was "not off the table," but said there were no plans to do so at this time.

Shares fell 1.4% after hours. However, as of Thursday's close, the stock is up more than 30% over the past 12 months.

For Costco's fiscal second quarter, revenue rose to $63.72 billion, above FactSet analysts' estimates for $63.11 billion. Same-store sales were up 6.8%, above forecasts for 6.4%. E-commerce sales jumped 20.9%.

On a GAAP basis, Costco earned $4.02 a share, compared with FactSet forecasts for $4.11.

Costco said that for the four weeks ending March 2 - the period it defined as the retail month of February - net sales were $19.81 billion, up 8.8% year over year.

During the chain's earnings call, Chief Financial Officer Gary Millerchip said that shoppers "are still showing that willingness to spend, but they're being very choiceful where they're spending their dollars."

"We think that's likely to continue and maybe even become more choiceful as the impact of some return of inflation and the potential impact of tariffs could flow through as well," he added.

Chief Executive Ron Vachris said that the tough foreign-exchange backdrop is likely to endure through the months ahead. He said about a third of Costco's U.S. sales were products imported from other nations, with less than half coming from China, Mexico and Canada. He said while the impact of tariffs was tough to predict, the company would try to minimize the impact of cost increases for its members.

Costco reported after Walmart Inc. $(WMT)$ - among the safest bets in the retail world thanks to its size and ability to keep prices lower - recently warned of its first year-over-year decline in quarterly profit in three years. Target Corp. $(TGT)$, meanwhile, warned of possible price increases in response to President Donald Trump's tariffs, which amount to a tax on imports.

Still, those tariffs have remained in flux. Trump on Thursday said that new 25% tariffs on imports from Mexico, which took hold earlier in the week, would be paused for most items until early April.

Moreover, retail sales fell in January, with demand hampered by cold weather and a holiday-season spending hangover. Consumer confidence has also shown signs of slipping.

As shoppers face higher costs of living, the biggest retailers - such as Costco and Walmart - have made deeper inroads with wealthier consumers looking for a break from inflation. Costco put up sales gains in December and January, and has said its pharmacy business is showing strong growth as drugstore chains struggle.

During Thursday's call, executives said demand for electronics - including for things like TVs, gaming computers and pinball machines - was solid. While higher-end meat products saw strong demand, lower-cost cuts like ground beef and poultry grew faster.

Vachris said that the environment surrounding tariffs was "very fluid." But he said that the company has the resources to change how it sources products to avoid the impact. And he said that other retailers were unlikely to be spared. "When it rains, it rains on everyone," he said.

"I feel like we are well-equipped to deal with whatever is coming in our direction, and not knowing what that's going to be, I can't really tell you what the outcome will be," he said. "But our people are nimble, and they're ready to go at it if they need to."

-Bill Peters

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March 06, 2025 19:08 ET (00:08 GMT)

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