Costco Wholesale Corporation (NASDAQ:COST, ETR:CTO) posted quarterly earnings and revenue that topped Wall Street estimates, as the membership-only warehouse retailer saw its sales jump 8% year-over-year.
For the fiscal third quarter which ended on May 11, revenue was $63.2 billion, ahead of the $63.19 billion expected by analysts.
Profit for the quarter was $1.9 billion or $4.28 per share, beating estimates of $4.24.
Costco does provide an annual outlook, but during its earnings call, CEO Ron Vachris addressed the impact of tariffs. The CEO said the company has proactively managed tariff challenges by accelerating shipments, sourcing more American-made products, and frequently adjusting prices to minimize cost impacts.
The company’s tariff exposure is well-managed, analysts at Jefferies believe.
“Costco re-confirmed that roughly a third of US sales are imported from other countries, including 8% from China, which drove positive low-single-digit percentage inflation in non-food items,” they wrote.
“Management noted rerouting these goods to non-US markets, advancing summer goods, and boosting locally sourced production in the US and Asia, which has lowered member prices by 40% in some regions.”
The analysts also highlighted Costco’s efforts to enhance the member experience through technology pilots, such as its expedited checkout technology, ‘Scan-and-Go.’
“Combined with the integration of digital membership cards and improvements in digital wallet usage, management noted improved throughput, evidenced by the immediate positive impact on gas station gallon sales,” analysts wrote.
Market share gains ahead
Jefferies maintained its 'Buy' rating on Costco following the company’s “strong print” for Q1, noting it is well-positioned for further share gains ahead.
“Costco is a defensive name by nature due to its membership model that generates predictable sales and profits, an attractive value orientation, a higher-income customer, and a relatively significant penetration of consumables as a percentage of sales,” they wrote.
“Additionally, the company continues to open new clubs in the US, has a meaningful runway for ongoing international expansion, notably China, and recently raised its membership prices.”
The analysts have a price target of $1,180 on Costco, reflecting upside of 17% at the time of writing.
Shares of Costco moved higher in early trade on Friday, adding 2.7% at about $1,036.