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Costco Beats Earnings and Revenue Forecasts, Yet Stock Dips as Tariff Tensions Loom

Costco Wholesale (NASDAQ: COST) posted stronger-than-expected third-quarter earnings and revenue on Thursday, buoyed by an 8% year-over-year sales increase and double-digit e-commerce growth. However, the warehouse retail giant’s stock slipped slightly as concerns over global tariffs and shifting trade policies clouded investor optimism.

While most retailers struggle under inflationary pressure and unpredictable trade dynamics, Costco’s business model — bulk sales, private labels, and discounted essentials — has provided resilience. But even this retail titan is feeling the heat from tariff tensions, forcing strategic operational shifts and supply chain maneuvers.

Financial Highlights: Costco’s Q3 by the Numbers

Costco reported a net income of $1.90 billion, translating to $4.28 per share, for the quarter ending May 11, 2025. This marked a sharp improvement over the $1.68 billion or $3.78 per share reported in the same quarter last year.

Total revenue climbed to $63.21 billion, narrowly topping analysts’ expectations of $63.19 billion, according to data from LSEG. This figure also represents a notable increase from the $58.52 billion in Q3 of the previous fiscal year.

Additional performance metrics include:

• Comparable sales: Up 8% across the board
• E-commerce sales: Jumped 15.8%, excluding fuel and FX fluctuations
• U.S. comparable sales (ex-gas and FX): Rose 6.4%
• Canada comparable sales: Up 7.5%

Tariff Strategies: How Costco Is Navigating Trade Headwinds

During the company’s earnings call, CEO Ron Vachris addressed how new and existing tariffs are reshaping Costco’s sourcing and inventory practices.

“We’ve proactively accelerated shipments ahead of tariff hikes and shifted sourcing to markets with more favorable trade terms,” Vachris noted.

Approximately 33% of Costco’s U.S. merchandise is imported, with about 8% coming directly from China, said CFO Gary Millerchip. In response to growing U.S.-China trade tensions, Costco has diverted supply chains and bulk-ordered items pre-tariff implementation. Many of these changes have impacted sourcing for Kirkland Signature, Costco’s top-performing private label brand.

Vachris added that certain staples — including eggs, butter, and olive oil — have seen price reductions, even amid rising import costs, to maintain member loyalty and value perception.

Consumer Loyalty vs. Rising Costs

To preserve its price advantage, Costco has taken a nuanced approach to pricing. For essentials such as bananas and pineapples, the company opted to absorb higher costs rather than pass them on to consumers. Meanwhile, discretionary items like flowers did see price hikes.

“We felt it was important to shield our members from price increases on staples by improving operational efficiency, even if that meant a tighter margin,” said Millerchip.

This customer-first strategy may help Costco retain its over 128 million members worldwide, even as other retailers — like Best Buy, Walmart, and E.l.f. Beauty — warn consumers about looming price hikes due to escalating tariffs.

Market Reaction: Why Shares Slipped

Despite beating analyst projections, Costco's stock dipped slightly in after-hours trading. The decline reflects investor caution, particularly around tariff-related cost pressures and Costco’s lack of forward guidance — a policy the retailer has maintained for years.

Still, Costco stock is up about 10% year-to-date, outperforming the S&P 500, which has gained less than 1% over the same period.

A Lean Inventory Model That Pays Off

Unlike traditional retailers that carry dozens of brands per product category, Costco deliberately limits its SKUs — often offering just one or two brands per item type.

This lean product strategy not only simplifies operations but gives Costco stronger leverage when negotiating supplier prices. If certain costs spike, the company can rotate to alternative products more efficiently than its competitors.

Looking Ahead: A Retailer Positioned for Volatility

While many retailers face headwinds from shifting global trade policies, Costco’s scale, pricing power, and flexible sourcing position it well for continued stability — and potentially even growth — if tariffs drive more consumers toward value-oriented shopping.

Costco’s emphasis on essentials, private-label products, and gas stations with extended hours helps ensure recurring foot traffic and high membership renewal rates.

The retailer’s strategic agility and brand loyalty may offer a buffer against economic volatility, even if share prices temporarily reflect broader market anxieties.