By Jennifer Williams
Costco shelves have a bit more health and beauty products and fewer Christmas trees and toys this holiday season.
The big retailer hasn't made wholesale changes and plenty of festive fare is still on offer, but it has selectively adjusted its product lineup in an effort to keep prices low for consumers while it navigates tariffs that have hit some holiday goods.
"There are certain items that we just felt like, if we continued to sell them with the impact we'd have seen on tariffs, the value would not have been there for the member," said Costco Chief Financial Officer Gary Millerchip. "But we still have plenty of Christmas trees, just a smaller range of them."
The changes affect only a little over 2% of Costco's roughly 3,800 unique products, Millerchip said, but taken together they resulted in a less traditional approach to the holiday season.
For shoppers, this means a slimmed-down holiday assortment, with fewer artificial Christmas trees and toys and other festive decorations that are imported and so subject to tariffs. Furniture, home decor and hardware items have also been dialed back, according to the CFO. In their place, the chain's members will see more health and beauty products, seasonal food and mattresses, as well as indoor saunas.
The country's third-largest retailer by revenue offers significantly fewer items than shoppers find in other big-box stores, a strategy aimed at ensuring quality and reasonable prices. With tariffs, the pricing calculation has shifted.
A little less than a third of Costco's sales in the U.S. come from items imported from other countries, executives have said. Costco last month sued the Trump administration in an effort to secure a full refund if the Supreme Court rules the duties Trump established are illegal.
The retailer is working to minimize the pricing impacts by moving production, absorbing some of the higher costs along with suppliers and consolidating orders to import more at one time. The last resort is raising prices, Millerchip said. As Costco weighed these options for certain items, insiders decided that some price tags would be too high.
To replace the tariff-impacted goods, Costco offers more seasonal food, health and beauty products, and mattresses, many of which are produced in the U.S. Shoppers see new holiday items like Kirkland Signature ribbon as Costco leans more on its own brand where it has greater control of the supply chain. It is also rolling out items that typically don't fit in stores during the holiday season, such as backyard sheds and indoor saunas.
There is also more space for newer brands to showcase items such as premium cookware and local food items, according to Millerchip. "And we've seen tremendous growth, double-digit growth there," he said.
The CFO is looking for any signs that the product switches have hurt sales, and so far hasn't noticed any. Costco shoppers aren't seeing fewer products overall because of the changes -- in fact, the number of unique products is slightly up, Millerchip said.
Costco saw net sales rise 8.2% to nearly $66 billion for the three months ended Nov. 23 from a year earlier, and many categories with product adjustments are up double digits, Millerchip said.
Sales growth has slowed slightly in recent months, as have membership renewal rates, analysts said. Costco's renewal rate in the U.S. and Canada was 92.2% for the latest three-month period while its worldwide rate was 89.7%, both down less than 1 percentage point from a year earlier as more customers sign up online who renew at a slightly lower rate.
Still, the numbers are strong, according to David Bellinger, a senior analyst at Mizuho Securities. "Most retailers would kill for Costco's numbers," he said. "But in terms of Costco, it's a bit slower."
A few factors are likely driving the softer numbers, such as older stores losing sales and traffic to new Costco locations in the U.S. and strong gold and gift card sales last year that make for tough comparisons now, said Chuck Grom, an equity analyst at Gordon Haskett. The adjusted product lineup may also be a factor, he said.
"They swapped out some typical Costco items for some nontypical Costco items," he said. "My suspicion is it's having an impact, but it's hard to know with certainty."
Jennifer Williams writes for WSJ Leadership Institute's CFO Journal. Reach her at jennifer.williams@wsj.com.
(END) Dow Jones Newswires
December 19, 2025 06:00 ET (11:00 GMT)
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