Costco Wholesale Corporation (NASDAQ: COST) released its fiscal second-quarter 2025 earnings report on March 6, 2025, revealing robust revenue growth but facing challenges in profit margins. Despite exceeding revenue expectations, the company experienced an earnings per share (EPS) miss, causing a slight dip in after-hours trading.
Revenue Growth Surpasses Estimates
Costco’s revenue for the quarter surged by 9% year-over-year to $63.72 billion, surpassing analysts’ projections of $63.13 billion. The company’s ability to drive top-line growth was fueled by strong same-store sales, which increased by 6.8%, exceeding the expected 6.4%. Additionally, e-commerce sales saw a notable 20.9% jump, reflecting the company’s growing online presence and digital strategy.
Earnings Miss and Margin Pressures
Despite the revenue beat, Costco’s earnings per share (EPS) came in at $4.02, slightly below Wall Street’s expectations of $4.09. The shortfall was primarily attributed to a 9% increase in merchandise costs, which pressured profit margins. Rising costs, driven by inflationary pressures and supply chain challenges, have been a recurring concern for retailers, and Costco is no exception.
Stock Reaction and Market Performance
Following the earnings announcement, Costco’s stock declined by approximately 1.4% in after-hours trading. However, despite the minor setback, the company’s stock has surged nearly 30% over the past year, reaching record highs in recent months. This upward momentum underscores investor confidence in Costco’s long-term growth strategy.
Future Outlook and Challenges
Looking ahead, analysts remain optimistic about Costco’s future performance, forecasting a 10% earnings growth for fiscal years 2025 and 2026. However, potential challenges, including inflation, tariffs, and ongoing supply chain disruptions, could impact profitability. As Costco continues to adapt to shifting market dynamics, its ability to manage costs while sustaining strong sales growth will be key to maintaining investor confidence.
In conclusion, while Costco’s Q2 2025 earnings report showcased impressive revenue growth and strong consumer demand, rising merchandise costs posed a challenge to profitability. Investors will be watching closely to see how the company navigates cost pressures in the coming quarters.