Costco reported quarterly profit growth that exceeded expectations, demonstrating the large retailer's continued benefit from sustained sales momentum. For the second quarter, Costco posted revenue of $69.6 billion, a 9.2% increase year-over-year, surpassing expectations by $280 million. Adjusted earnings per share came in at $4.58, beating the average estimate by 3 cents. Total membership fee revenue for the quarter reached $1.36 billion, exceeding market forecasts. Comparable store sales for the quarter ending February 15 grew by 7.4%, higher than the consensus estimate of 6.7%. The average transaction size increased by 4.2%, while customer traffic rose by 3.1%.
The large retailer reported U.S. comparable sales growth of 5.9%, above the expected 5.7%. Excluding the impact of gasoline price fluctuations and foreign exchange rates, U.S. comparable sales increased by 6.4%, with an overall growth of 6.7%. Both figures surpassed analysts' average expectations. By offering large package sizes and a unique product selection, Costco has attracted value-conscious consumers, particularly those with higher disposable income, helping it gain market share. The retailer has also expanded its e-commerce and delivery services and introduced exclusive shopping hours for its premium members.
According to company filings, global and U.S. membership renewal rates for the quarter were slightly lower than the same period last year but remained largely consistent with the previous quarter. Gold, jewelry, toys, and small electronics were among the best-selling categories this period. With over 800 warehouses worldwide, Costco's ever-changing merchandise assortment, including its Kirkland Signature private label brand which offers everything from tequila to chocolate pie, has won consumer favor. Shoppers pay an annual membership fee and typically belong to a more affluent demographic, which represents a key driver of current U.S. consumer spending.
Costco has been actively catching up in the e-commerce space, with its digital sales growth now outpacing overall sales growth. In the most recent quarter, Costco's e-commerce sales surged by nearly 22%, exceeding average expectations. The retailer is collaborating with third-party delivery companies like Instacart while expanding services such as cake delivery and deli platters. This strategy helps attract younger consumers, although this group's membership renewal rates are lower than other customer segments.
In a separate development, the U.S. Court of International Trade ruled that U.S. Customs and Border Protection must refund tariffs previously collected under the International Emergency Economic Powers Act (IEEPA). The ruling, stemming from a case brought by auto parts manufacturer Atmus Filtration Technologies, is expected to accelerate the refund process for companies that paid these tariffs over the past year. A wide range of businesses, from large retailers like Costco and logistics giant FedEx to numerous small enterprises struggling with increased import costs, could benefit from this decision.
This ruling follows a prior U.S. Supreme Court decision that found most tariffs levied by the Trump administration under IEEPA unlawful. The Supreme Court had referred the refund question to the Court of International Trade, which holds exclusive jurisdiction. The Trump administration had expressed dissatisfaction with the earlier ruling and sought new legal avenues to continue imposing tariffs on imports. Government officials had previously stated that refunding collected tariffs would be "extremely complex" to implement.
Judge Richard Eaton, who issued the ruling, stated that cases related to IEEPA tariff refunds would be handled solely by him. Scott Lincicome, Vice President of Economic Policy at the Cato Institute, described the judge's order as "surprisingly simple," mandating refunds for all importers to be processed as quickly as possible. He characterized the ruling as "equivalent to a bombshell" for the market.
International trade lawyer Doug Jacobson indicated that the order implies all IEEPA tariffs paid since late April of last year should be refunded. According to estimates from the University of Pennsylvania's Wharton Budget Model, U.S. Customs had collected approximately $175 billion through IEEPA tariffs, funds that now must be refunded to importers with interest. The ruling means importers can receive refunds without needing to file individual lawsuits. Companies including Costco, FedEx, and Toyota Motor had previously filed legal challenges regarding the tariffs.
Jacobson suggested that the more than 2,000 related cases currently backlogged at the Court of International Trade are expected to be resolved collectively under this ruling. Lincicome noted this is "a victory" for many small businesses lacking the resources to pursue litigation. Ideally, U.S. Customs and Border Protection could automate refunds to businesses through its already digitized customs declaration system. Industry observers believe companies could receive refunds within months if the government opts for swift implementation.
However, some legal experts anticipate the government may attempt to delay the process. Ryan Majerus, a former U.S. Trade Representative official and current partner at King & Spalding, suggested the government might seek a stay of the order or an extended implementation period. Lincicome also believes the government could delay refunds through appeals or by increasing scrutiny of customs declarations. In a separate court filing, the U.S. government has confirmed it will pay interest on the refunds. A Cato Institute report released this week estimated that for each month of delay, interest costs could increase by approximately $700 million.
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