Costco (COST) Stock Climbs Despite Q3 Earnings Miss on Strong Revenue Performance

Key Highlights

• The warehouse club reported third-quarter earnings of $4.93 per share, falling short of the $4.98 Wall Street consensus, while revenue reached $70.5 billion, exceeding expectations
• Comparable store sales increased 6.6%; e-commerce comparable sales surged 20.4% during the quarter
• Unprecedented gasoline sales volumes occurred late in the quarter as nationwide fuel prices climbed to $4.42 per gallon
• Profit margins declined from 11.25% to 11.04%, pressured by rising fresh food expenses and elevated shipping costs
• Shares of COST have gained approximately 15% in 2025 but retreated over 7% following the May 20 retail sector selloff

Shares of Costco (COST) climbed 0.3% during Friday’s pre-market session following the warehouse retailer’s release of mixed fiscal third-quarter financial results on May 28.

Costco Wholesale Corporation, COST

The equity had experienced a decline exceeding 7% beginning May 20, coinciding with broader retail sector reporting. This prior weakness likely moderated investor response to the earnings shortfall.

Costco delivered earnings of $4.93 per share for the period concluded May 10, missing analyst projections of $4.98. Total revenue registered $70.5 billion, representing an 11.5% year-over-year increase and surpassing the $69.68 billion consensus forecast.

Comparable store sales expanded 6.6% during the quarter. Membership fee revenue advanced 10.5% versus the corresponding prior-year period to $1.37 billion, though this trailed the previous quarter’s 14% expansion.

Total paid memberships increased 4.1% for the quarter. Management reported renewal rates remained robust.

E-Commerce and Fuel Sales Shine

Digitally-enabled comparable sales jumped 20.4% throughout the quarter. Combined website and mobile application traffic increased 37% year-over-year. Customized online shopping features generated conversion rates triple the site-wide average, helping drive approximately $5 billion in digital revenue.

Fuel sales emerged as another performance highlight. Chief Executive Ron Vachris informed analysts the retailer experienced “record-breaking” gasoline volumes approaching quarter-end. AAA data showed the national average gasoline price reached $4.42 per gallon, rising 25 cents within one month and up from $3.16 twelve months earlier.

“The high consumer price sensitivity, which fueled these record volumes, also drove many members to use our gas stations for the very first time in the third quarter,” Vachris said.

Chief Financial Officer Gary Millerchip noted that members utilizing fuel stations demonstrate higher overall spending levels and superior renewal rates.

Profitability Metrics Face Headwinds

Gross profit margin contracted from 11.25% in the year-ago quarter to 11.04% in the current period. The company attributed this compression to diminished margins on fresh products including beef and eggs, combined with escalating freight expenses.

Quarterly net income totaled $2.19 billion, advancing 15% compared to the prior year.

The retailer has submitted applications to the Trump administration seeking tariff reimbursements but indicated any approved refunds will not enhance profitability. Management intends to transfer any savings directly to shoppers.

“Our goal is to be the first to lower prices and the last to raise them,” Vachris said on the earnings call.

COST currently trades at a forward price-to-earnings multiple of 48.5, exceeding Walmart’s forward P/E ratio of approximately 41.

Year-to-date, the stock has appreciated roughly 15%, outperforming the S&P 500 index, and established fresh all-time peaks earlier this year before the recent correction.

Shares displayed minimal movement in extended trading hours following the quarterly announcement, with the forward valuation multiple remaining at 48.5 amid ongoing margin challenges.

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