Costco (Cost.US) Q1 Results Exceed Expectations, Resilience of Wealthy Customers' Spending

After the U.S. stock market closed on Thursday, Costco (COST.US) announced its financial results for the first quarter of the 2025 fiscal year ending November 24, 2024. Costco's quarterly profits exceeded market expectations, indicating that this large retailer has not been affected by the tightening of consumer spending. The data shows that the company's Q1 revenue was $62.15 billion, an increase of 7.5% year-on-year, better than market expectations; earnings per share were $4.04, higher than market expectations. Costco stated that the performance includes a $100 million tax benefit related to stock compensation. Costco reported that membership numbers increased in the first quarter, with around 90% of existing members renewing their services. On a same-store basis, foot traffic increased, but the number of transactions remained flat. These results solidify Costco's unique position among U.S. retailers, as its affluent customer base is willing to pay annual membership fees, which helps the company maintain robust performance. Costco reported that sales and foot traffic have grown in recent months. Food sales have been good, and non-essential items like jewelry and home goods have sold well. Comparable sales, excluding gasoline and currency impacts, increased by 7.1% in the first quarter. Online sales also grew. Costco is one of the last U.S. retailers to report its 2024 performance. After years of high inflation rates, consumers remain picky and seek the best deals. However, they are still willing to open their wallets and buy new, affordable goods. Costco CEO Ron Vachris said during the earnings call, "This year, consumer spending is very focused on essential needs." Seasonal products have sold well so far, and furniture has been a driver of e-commerce sales this holiday season. Executives also added that consumers have shifted spending from restaurants to food and groceries. Consumers also prefer high-end and low-priced goods. Costco, which operates over 800 stores, raised membership fees earlier this year. The company also installed more membership card scanners in more locations, partly to prevent shoppers from sharing membership cards. Additionally, Teamsters Union President Sean M. O'Brien warned on Thursday that Costco is "heading into dangerous waters," after this retail giant rejected 98% of the union's demands. The Teamsters Union represents 18,000 Costco employees nationwide. The current contract was approved in October 2022 and is set to expire in 7 weeks, with negotiations underway for paid family leave, bereavement policies, sick leave, safeguards against surveillance, and key terms regarding qualifications in the contract. If Costco does not present a collective bargaining agreement by January 31 next year, union members will go on strike. As of the time of writing, Costco's stock price fell 0.02% after hours, to $988.20. The stock has risen over 50% since the beginning of the year.