On May 30, 2025, Runnymede’s Andrew Wang joined Alex Coffey on Schwab Network’s Market On Close to break down Costco’s (COST) latest earnings report — and why it’s one of the most resilient names in retail, even as tariffs and inflation pressure the broader consumer landscape.

🟩 Costco’s Q3: A Masterclass in Retail Execution

Costco posted a strong fiscal Q3, delivering:

  • EPS: $4.28 (vs. $4.24 expected)

  • Revenue: $63.21B (+8% YoY)

  • U.S. Comps (ex-gas): +7.9%

  • Traffic: +5.2% | Average Ticket: +2.7%

Andrew emphasized that while Costco missed slightly on revenue expectations, its ability to beat on earnings highlights what really matters in this environment: margin control and operational discipline.

“Costco isn’t just managing through tariffs — it’s leveraging them to widen its value advantage.”

— Andrew Wang on Schwab Network

While competitors like Walmart are raising prices in response to tariffs, and Target is holding prices but cutting guidance, Costco is taking a different path — treating price hikes as a last resort.

🟦 Turning Tariff Headwinds into Strategic Tailwinds

Wang credited Costco’s strategic moves for navigating tariff pressures without losing momentum:

  • Only ~8% of U.S. sales are exposed to China tariffs

  • Pulled forward inventory ahead of tariff deadlines (+7% YoY)

  • Simplified SKU count (~4,000) allows for agile sourcing shifts

  • Diversified supply chain routes and global allocation of products

Kirkland Signature, Costco’s in-house brand, continues to be a secret weapon, helping maintain price leadership and customer loyalty.

🟨 Memberships: The Recurring Growth Engine

Membership fee income (MFI) climbed 11.4% YoY (ex-FX), boosted by a recent fee hike. With Executive Members now accounting for 73% of total sales, Costco’s subscription model remains a fortress of predictable, high-margin revenue.

“With predictable earnings from memberships and rising digital tailwinds, Costco remains one of the steadiest hands in retail.”

— Andrew Wang

Even amid shaky consumer sentiment, Costco’s comp sales came in hot, a testament to the trust members place in the brand.

🟪 E-Commerce Momentum, Especially in Big-Ticket

Costco isn’t typically the first name that comes to mind in e-commerce, but it’s quietly scaling where it matters:

  • E-commerce comps: +15.7% YoY (ex-FX)

  • Costco Logistics deliveries: +31% YoY

  • ~85% of bulky, online purchases now delivered via Costco’s own infrastructure

This growth in digital — particularly for appliances, housewares, and electronics — reinforces Costco’s omni-channel strength.

🟥 Valuation Watch: High Expectations, Little Room for Error

Still, Wang flagged a key risk: expectation fatigue. As of May 30, Costco was trading at a lofty ~55x forward earnings, well above its historical average (30–44x).

🎙️ “Costco’s biggest risk right now isn’t operations — it’s expectation fatigue.”
— Andrew Wang

With many sell side analysts increasing price targets above $1,000, the stock’s rich valuation limits near-term upside unless results are flawless. That raises the risk of volatility, even on solid performance.

Conclusion

Costco continues to set the bar in retail — not just with low prices and loyalty, but with strategic thinking that turns external challenges like tariffs into competitive advantages. From lean inventory management to Kirkland Signature’s value punch and the quiet buildout of e-commerce logistics, the company is reinforcing its moat at every turn.

But for investors, valuation discipline matters. At this multiple, any stumble — be it comps, traffic, or membership fee growth — could trigger a pullback.