Costco (COST) delivered strong financial performance in Q2 2025. Net income reached $1.788 billion—or $4.02 per diluted share—up from $1.743 billion (or $3.92 per diluted share) in the same quarter last year. Excluding a discrete tax benefit from the prior year, net income and earnings per diluted share grew by 8.4% year-over-year. Operating income increased by 12.3%, though this gain was partly offset by a $70 million headwind in interest and other expenses.

Net sales for the quarter climbed to $62.53 billion, a 9.1% increase over last year's $57.33 billion. Comparable sales growth was robust across regions—with US sales rising 8.3%, Canada up 4.6% (or 10.5% when adjusted for gas deflation and FX), and other international markets growing 1.7% (or 10.3% adjusted). E-commerce comparable sales surged by 20.9% (or 22.2% when adjusted), while global traffic increased by 5.7% and the average transaction value rose by 1%.

Membership fee income grew by 7.4% year-over-year, reaching $1.193 billion. When excluding FX impacts, growth was 9.4%, with a recent membership fee increase contributing about 3% to that gain. Renewal rates remained strong, at 93% in the US and Canada and 90.5% worldwide, while paid household memberships increased by 6.8% to 78.4 million. Executive memberships also grew by 9.1%, now accounting for 47.1% of paid members and 73.8% of worldwide sales.

Cost control was a focus as well. Gross margin improved slightly to 10.85%—up five basis points—while core margins on self-sales declined by eight basis points due to investments in supply chain and mix shifts in non-food categories. SG&A expenses showed improvement, decreasing by eight basis points thanks to enhanced labor productivity and cost discipline, although the new employee agreement (effective March 3rd) is expected to impose a 13 basis point headwind in the upcoming quarter.

Costco’s merchandising performance was impressive. Non-food categories led the way with mid-teen comparable sales growth. High-performing items included large consumer electronics such as 98-inch TVs, gaming computers, and Stern pinball machines. Fresh food sales grew in the high single digits—driven by double-digit growth in meat—while bakery, produce, and food and sundries also delivered solid performance. Additionally, Kirkland Signature products continued to outperform overall business growth with new introductions like diapers, French fries, and vodka and soda.

Digital initiatives further bolstered Costco’s results. E-commerce showed considerable strength, with double-digit gains in home furnishings, small electrics, hardware, and sporting goods. Costco Logistics enjoyed a record holiday season by delivering over 500,000 items, and Costco Next, the curated marketplace, also achieved record holiday sales. Moreover, the new warehouse tool in the app attracted over 43 million visits, enabling members to view local item availability and prices.

International business contributed record results, particularly in Canada, which led in comparable sales growth when adjusted for FX and gas deflation. Looking forward, Costco plans to open 28 new warehouses in fiscal year 2025—including 15 in the US, 3 in Canada, and 7 in other international markets—with nearly half of these openings targeted outside the US to tap significant growth opportunities.

Costco also underscored its commitment to employees. The new employee agreement brings immediate and future wage increases—raising the top-of-scale wage for US service clerks to $31.90 per hour and the minimum wage to $20 per hour. New employees now receive paid vacations during their first year, and a sixth week of vacation is awarded after 30 years of service.

Inflation trends were mixed. Fresh food categories, especially meat and bakery, experienced the highest inflation, while food and sundries saw low single-digit inflation and non-food categories even turned deflationary. Despite these challenges, the supply chain remained stable, although shipping delivery dates are still less predictable than before COVID.

Finally, alternative revenue streams showed promising progress. Enhancements to the co-branded credit card now offer executive members 4% cashback on most purchases and 5% cashback on gas. Additionally, retail media campaigns are in their early stages—with ten campaigns currently live and more planned—demonstrating Costco’s strategy to reinvest these initiatives in member value rather than treating them as separate revenue streams.