Shares of Costco (COST -6.50%) traded 6.4% lower, as of 10:14 a.m. ET, after the large membership retailer reported mixed earnings results. Management also made comments about the impact of tariffs on its business and the retail sector as a whole.
Costco reported earnings per share of $4.02 for its second fiscal quarter of 2025, missing Wall Street analyst estimates by $0.09. Revenue came in at $63.7 billion, beating estimates of $63.13 billion.
On the earnings call, management said that roughly one-third of Costco's sales in the U.S. are imported, and less than half of that number are products from China, Mexico and Canada. Management further said that while the situation continues to evolve rapidly, it will work hard to lessen the impact of higher prices on its customers.
Management also said that tariffs would be felt by the entire sector. "As we say, when it rains, it rains on everyone such as a tariff that we're all equal there, and I feel like our people are very well-equipped to deal with anything coming our way with our reduced SKU (stock keeping units) model, and we have great partnerships with our suppliers and those items are very important to them as well," CFO Gary Millerchip said on the call.
Costco raised annual membership fees last September for the first time since 2017. In the second fiscal quarter, management said the increase contributed about 3% to fee income, but that most of the benefit from higher membership fees will come over the next four quarters.
As many know, Costco experienced a significant rerating in 2024. Even after the sell-off in recent weeks, the stock still trades at 53 times forward earnings. The company is well run, but because of the elevated valuation and the ongoing tariff situation, I'm not rushing to buy the stock just yet.
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