Reported earnings per share (EPS) were $4.04, up from $3.58 last year. Net sales were $60.99 billion, up 7.5 percent from last year. Same-store sales were up across all geographical regions, but these gains were overshadowed by e-commerce sales, up 13.2 percent.
Wall Street’s response to the company’s financial results was muted, with its stock trading sideways in Friday’s trading session. But the stock price is up 50 percent for the year and 115 percent over five years, outperforming the broader market.
Costco is a textbook case of a great company and a great but expensive investment. It’s a great company because it ranks highly on several of the best company lists. For instance, it ranked first in the Newsweek customer service survey in 2019 and topped the Annual Customer Satisfaction Index for 2017–24.
“Over the years, Costco has honed a retail formula that it rarely deviates from, leading to quarter-after-quarter, year-over-year success. Costco remains deeply committed to its mission: ‘To continually provide our members with quality goods and services at the lowest possible price,’” Pamela Danziger, founder of Unity Marketing, said in an email to The Epoch Times.
“Costco lives its mission by offering a full range of things people need every day—prescription drugs, grocery, toilet paper, lightbulbs, underwear, dish, and laundry detergent—plus things they occasionally need—clothing, furniture, electronics, small and major appliances—as well as lots of stuff they don’t—think fine jewelry and gold bars.”
Costco’s commitment to delivering value has a strong following among consumers, who pay a membership fee to shop at its stores and site.
Meanwhile, Indeed.com places Costco at the top of the best workplaces list, making it easy for the wholesale retailer to attract a qualified labor force.
“Customer and employee loyalty go hand in hand,” Danziger said. “By building a corporate culture where it does right by its employees, Costco assures everyone does right by the customers.”
Companies that keep customers and employees happy make suitable investments. Happy customers help spread the word about the brand, while happy employees provide services that meet customer expectations, supporting and reinforcing the brand’s buzz.
Costco’s popularity has fueled the company’s growth from 592 warehouses back in 2011 to 897 by 2024, including 617 in the United States and Puerto Rico, 109 in Canada, 41 in Mexico, 36 in Japan, 29 in the United Kingdom, 19 in Korea, 15 in Australia, 14 in Taiwan, and seven in China. However, it is still a “small” company in terms of store count compared to its peers, like Walmart (which as of fiscal year 2024, the company has more than 10,600 stores, in variants, worldwide).
Equity analysts like a small store count, leaving plenty of room for the company to grow.
The problem is that Wall Street may have already discounted Costco’s growth prospects, making the stock too expensive. In the middle of 2024, Costco was trading with a forward price-to-earnings (P/E) ratio of 47, more than twice the historical average of the benchmark S&P 500 Index. In addition, Costco had a P/E adjusted for growth (PEG) of 6, meaning that the stock is still expensive even after the P/E is adjusted for growth.
These valuations leave little room for error for investors looking for an entry point at the current market price.
Still, brand strategist Reilly Newman is optimistic about the company’s future.
Just as it is only starting to flex its e-commerce muscle as the brand evolves, it is, most importantly, staying true to its brand.
Newman believes the crackdown on the multi-use of membership will continue to lift Costco’s profitability, as membership directly reflects its profit.
“As a brand, their focus will remain on their members,” he said. “This strategy will continue to prove effective as it evades the theft issues most retailers are desperately trying to solve while continuing to provide value. Fortunately for Costco, these are all naturally baked within their strategy.”
For Newman, focusing on members will increase value in the warehouse or digital, driving better selection and attracting more members.
“This membership creates a pull for more value and directly impacts profitability,” he said.
“The brand has stayed true to its promise and perception even as it has evolved. This is compounding on many fronts and will continue to drive value for both members and shareholders.”
