Costco Execs Weigh In on Tariff Impacts, Tech Investments
As Costco Wholesale Corp. shared the results of its recently concluded third quarter, the club operator also took the time to shed insights on the future. That future involves tech, as Costco disclosed in its earnings call that it is investing in speedier checkouts, similar to ones that mass retailers like Sam’s Club are using.
“Our operations team is really focused on the front ends and we know there’s many benefits to that part of the Costco experience of moving people through much better,” said CEO Ron Vachris on the May 29 call with analysts. He reported that the company is working on accelerating checkout through digital capabilities and also focusing on digital membership card usage.
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While Costco’s teams explore enhancements to in-club and online experiences, the business fundamentals remain fairly strong. For the 12-week period ending May 11, net sales rose 8% year-over-year (YoY) to hit $61.96 billion, while comps grew by 5.7%. Net income for Q3 came in at $1.9 billion versus $1.68 billion last year. Earnings per share (EPS), which reached $4.28, were slightly above the forecast of $4.24.
Costco expanded its footprint and its base during Q3. The company opened nine new warehouses in that time frame and saw a membership fee bump of 10.4%. As for the rest of the year, the operator expects to unveil 10 more warehouses during Q4.
Vachris said that the company was able to navigate a quarter marked by some overall headwinds. “Our merchandising and operations team did a fantastic job in the quarter, delivering some strong financial results while also maintaining our competitive price position despite a challenging macroeconomic backdrop,” he shared. “Capitalizing on the focus and scale we are able to achieve through our limited SKU count and global footprint, we continue to increase the overall value of our membership, including extended gas station opening hours and lowering prices on some key items such as eggs, butter and olive oil."
On that last point, CFO Gary Millerchip provided additional context: “In general, we feel margin pressure during times of inflation on these types of ingredients as we keep prices low for our members. And the opposite is often true when prices fall as we feel the margin relief faster while also being able to lower prices more quickly than our competitors.
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"An example of this during the quarter is our croissant program, where we held prices lower when butter costs were elevated and are now seeing margin relief as those costs have come down,” he continued. According to Millerchip, food and sundries margin also increased during the Q3 and Costco was able to lower egg prices by approximately 10% and butter by about 7%, while also returning margins to more normal levels.
The question of tariffs came up during the earnings call, and Millerchip addressed how the company is responding to the whipsaw nature of current trade issues. “It’s just such a dynamic environment right now that really the focus that we’ve had in our buying teams is really staying agile to manage the situation,” he noted. “A lot of the focus the team has right now is as we look at the impact of tariffs is ‘Where are the places we can work with our suppliers to find ways to be offsetting some of the impact of those? Where are places where we could potentially be sourcing with them from different countries if that’s practical to minimize the impact?’”
Millerchip also revealed that so far, tariffs don’t seem to be moving the needle much in consumer behavior. “We’re not really seeing any change in what we’ve seen around our members over the last really few quarters,” he observed. “We believe that the member is probably as much focused now on quality, value and newness as they have been for quite some time. But they are still showing that willingness to spend, but they’re being very choiceful where they’re spending their dollars.”
Meanwhile, in addition to affirming Costco’s exploration of automated checkouts, Vachris recapped other ways that the company is investing in tech, including the launch of its buy-now-pay-later offering through a partnership with Affirm. “This new program allows our members greater access to the Costco values on big ticket items such as appliances, furniture, consumer electronics and much more at exclusive rates for the Costco members. While still early days, we’ve been pleased with the initial sales results,” he said.
Costco is No. 3 on The PG 100, Progressive Grocer’s 2025 list of the top food and consumables retailers in North America. PG also named the company to its Retailers of the Century list.
