Costco Profit Beats Expectations, Home Goods Sales Booming
Costco recently reported first-quarter earnings for fiscal year 2025, and its results beat market expectations, showing that the commodities retailer has maintained strong growth despite tightening consumer spending. Its unique business model and affluent membership base have helped the company maintain a competitive advantage in the market.
Mobile shopping accounted for 57 percent of online sales on Cyber Monday, or $7.6 billion in spending, up 13.3 percent year-over-year. That's up from 2019, when 33 percent of Cyber Monday sales came from mobile devices.
Costco's customer base is willing to pay for an annual membership that serves as a guarantee of its stable income. Customers are attracted to the company's constantly updated “big package” products, which are favored for their affordability, and Costco's own brand, Kirkland, which ranges from batteries to tequila, is also very popular.
During the quarter, Costco saw an increase in membership and approximately 90% of current members chose to renew their membership. In terms of same-store sales, the number of transactions was flat, although customer traffic was up.
Costco earned $4.04 per share in the first quarter ended Nov. 24, beating analysts' estimates gathered by Bloomberg. Earnings in the earnings report included a tax benefit of $100 million related to equity awards, the company said.
Costco has seen an increase in sales and traffic in recent years. Food items have performed well, and non-essential items such as jewelry and home furnishings,epecially home storage products have also sold well. Excluding the impact of gasoline and currency exchange rate fluctuations, the company's same-store sales increased 7.1%. Online sales also increased.
In 2024, the consumer market remains cautious, with consumers becoming more discerning after years of hyperinflation and still looking for value for money.Costco CEO Ron Vachris mentioned in a conference call with analysts, “Consumer purchases this year have been very basic.”
Currently, seasonal items are performing well, while furniture,home storage items have been one of the drivers of e-commerce sales this holiday season. The executives also added that consumer spending is shifting from food and beverage to food and Household Essentials Metal goods, while demand for high-end and lower-priced items is also increasing.
Bloomberg Intelligence analysts Jennifer Bartashus and Jibril Lawal said, “Spending on non-essentials is improving, although consumers remain focused on finding value.”
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