Costco leadership spent their Q1 earnings call highlighting its warehouse and product expansion, membership growth and other initiatives Thursday, but stayed silent on the company’s tariff lawsuit against the Trump administration.
The Issaquah, Washington-based wholesale retailer reported growth across the board in Q1, with $66 billion in net sales, up 8.2% year over year, and $2 billion in net income, up 11.3%.
The company’s earnings of $4.34 per share on revenue of $67.31 billion for the quarter ended November beat the consensus analyst earnings estimate of $4.26 per share on revenue of $67.15 billion, according to Earnings Whispers.
Food sales up
Fresh sales grew mid- to high-single digits in the quarter, led by double-digit growth in meat department sales, according to CFO Gary Millerchip, who did not reveal detailed numbers by food category.
“We saw strong growth in higher-cost cuts of beef and even greater unit growth in lower-cost proteins like ground beef and poultry,” Millerchip said.
Bakery experienced high single-digit growth, driven by new products, such as Costco’s seasonal Holiday Dessert Bars and its Crème Brûlée Bar Cake.
New products drove growth in food and candy, particularly with on-trend items like Dubai chocolate performing well, Millerchip said.
Costco’s private-label Kirkland Signature product sales grew faster than the retailer’s overall sales. Its store brands, both in food and non-food categories, are up to 20% less than national competitors, Millerchip said.
“In Q1 we launched approximately 45 new Kirkland Signature items, including dry facial daily clean towels, caramelized blueberry croissants and various apparel items, in addition to our latest food court, offering: a caramel brownie,” he said.
Q1 marked the third consecutive quarter of single-digit inflation, but lower inflation in eggs, cheese, butter and produce helped offset higher inflation in commodities such as beef, seafood and coffee, according to Millerchip.
Navigating Trump tariffs
CEO Ron Vachris and Millerchip made little mention of the impact of tariffs on its business and did not discuss Costco’s lawsuit against the Trump administration, seeking damages from tariffs imposed under the International Emergency Economic Powers Act (IEEPA).
That case was heard on Nov. 5 by the US Supreme Court and is currently under review – a decision is expected within the next few weeks.
Millerchip said Costco is navigating the tariff turbulence by increasingly sourcing products made in the US, which “are largely unimpacted by tariffs.”
“In replacement of some tariff-impacted items, our buyers have sourced a number of alternative great value items, including seasonal food, health & beauty and live goods [such as plants],” he said, noting that the retailer’s buyers “continue to do a great job reducing the impact of tariffs for our members.”
Global warehouse growth
Costco, which operates 923 warehouses and employs more than 340,000 workers worldwide, opened eight new warehouses in Q1, including a relocation in Canada, the bulk retailer’s third warehouse in France, four in the US and two business centers in Canada.
The warehouse retailer operates primarily in North America, with 633 warehouses in the US and Puerto Rico, 114 in Canada and 42 in Mexico. Costco has further expanded its international footprint in Japan (37), the UK (29), Korea (20), Australia (15), Taiwan (14), China (7), Spain (5), France (3), Sweden (2) and one each in Iceland and New Zealand.
“We continue to see significant opportunities for future warehouse growth,” Vachris said, adding that Costco plans to open 28 new locations worldwide in fiscal year 2026 and more than 30 annually thereafter.
The warehouse retailer is “being creative with real estate projects to further increase the potential for future growth,” Vachris said, noting that Costco opened a new warehouse in Mulhouse, France, in a vacant Auchan hypermarket in November.
Costco also recently converted two home improvement warehouses in Canada into Costco Business Centers, which provide bulk products to restaurants, foodservice operations, convenience stores and other businesses.
“We continue to see improvements in the performance of our new buildings and a reduction in their time to maturity, with fiscal year 2025 openings generating an annualized $192 million per warehouse of sales in the year of opening,” Vachris said. “That is up from $150 million for new warehouses opened just two years earlier.”
