Costco (COST) Wholesale Corp's financial performance in Q1 2025 showed a robust increase in net sales by 8% to $60,985 million, driven by an increase in comparable sales and the opening of 26 new warehouses since the end of Q1 2024. Membership fee revenue also rose by 8% to $1,166 million, reflecting new member sign-ups and upgrades to Executive Membership. The gross margin percentage increased by 24 basis points, with a notable contribution from core merchandise categories and the co-branded credit card program. However, SG&A expenses as a percentage of net sales increased by 14 basis points, remaining flat when excluding the impact of gasoline price deflation. Net income for the quarter was $1,798 million, or $4.04 per diluted share, compared to $1,589 million, or $3.58 per diluted share, in the previous year. A quarterly cash dividend of $1.16 per share was declared and paid in November 2024.

Segment results reveal that the United States segment generated the highest total revenue of $45,088 million, followed by Canada with $8,404 million, and Other International with $8,659 million, leading to a total revenue of $62,151 million for the 12 weeks ended November 24, 2024. Operating income for these segments was $1,498 million, $362 million, and $336 million, respectively, totaling $2,196 million. This represents an increase from the previous year's total revenue of $57,799 million and operating income of $1,984 million. The U.S. segment's performance was similar to the consolidated results, with the Canadian and Other International segments showing increased gross margin percentages due to core merchandise categories.

Strategic initiatives and growth drivers include the opening of seven new warehouses, including one relocation, in Q1 2025, with plans to open 22 additional new warehouses, including two relocations, during the fiscal year. Capital expenditures for the quarter amounted to $1,264 million, with a total of approximately $5,000 million planned for fiscal 2025. These expenditures are expected to be financed through cash from operations, cash and cash equivalents, and short-term investments. The company's focus on expanding its warehouse footprint is a key growth driver, supported by strong cash flow from operations and a solid cash and investment position.

Risk drivers and legal proceedings include over seventy product liability cases related to the sale of stone countertops, with allegations of strict liability, negligence, and other claims. Additionally, the company is under investigation by the U.S. Attorney's Office for potential False Claims Act violations concerning prescription medications and has received a Notice of Intent from the EPA regarding alleged violations of the Federal Insecticide, Fungicide, and Rodenticide Act. Despite these challenges, the company does not believe these matters will have a material adverse effect on its financial position, results of operations, or cash flows.

Market and financial risks remain stable, with no material changes in exposure to foreign-currency exchange rates and interest rates since the last fiscal year. The company's liquidity and capital requirements are expected to be met through its cash and investment position, operating cash flow, and available credit agreements. The decrease in net cash provided by operating activities, from $4,651 million in Q1 2024 to $3,260 million in Q1 2025, was primarily due to an increase in net investment in merchandise inventories. Net cash used in investing activities increased to $985 million, mainly due to capital expenditures.