Costco opened 27 new warehouses (24 net new) in fiscal 2025, including 15 in the U.S. and 7 in Other International segments, demonstrating ongoing physical expansion. The company plans to open up to 35 new warehouses in fiscal 2026, signaling continued aggressive growth.

Total paid members increased to 81,000 (in thousands) in 2025 from 76,200 in 2024, alongside strong worldwide member renewal rates of 89.8%. This sustained growth in the membership base, including Executive members representing 73.6% of worldwide net sales, underpins the company's recurring revenue model.

E-commerce comparable sales increased by 16% in 2025, maintaining the same growth rate as 2024, and represented approximately 7% of total net sales. Combined with Costco Travel, digitally-enabled sales accounted for about 10% of total net sales, indicating successful digital channel integration and growth.

In March 2025, management increased the starting wage by $0.50 per hour to at least $20.00 for entry-level positions in the U.S. and Canada, and raised top wage scales by $1.00 per hour. This commitment to competitive compensation contributes to a high retention rate of approximately 94% for employees with over one year of service.

The Board of Directors approved a 12% increase in the quarterly cash dividend in April 2025, signaling confidence in future cash flows and profitability. Additionally, the company continued its share repurchase program, buying back 943,000 shares for $903 million in 2025 under a $4,000 million authorization.

While Selling, General and Administrative (SG&A) expenses as a percentage of net sales increased by 11 basis points to 9.25% in 2025, the increase was only 3 basis points when excluding the impact of gasoline price deflation. This suggests management is largely maintaining cost control despite significant revenue growth and expansion.

The company acknowledges increased security threats and sophisticated cyber misconduct, including phishing and ransomware attacks, which are increasing in frequency and sophistication. Failure to protect systems and data could lead to reputational damage, litigation, and significant financial costs, despite substantial investments in IT security.

Costco is subject to an increasing array of global privacy and data protection regulations (e.g., GDPR, CCPA, China's PIPA) and emerging extended producer responsibility laws, which could lead to significant penalties and increased operating costs. Failure to comply or adapt to these evolving regulations could adversely affect business operations.

The company's operations are susceptible to disruptions from extreme weather, pandemics, labor issues, and shipping problems, which can delay merchandise delivery and impact sales. Furthermore, general economic factors like inflation, commodity price volatility, and foreign-exchange rate fluctuations (negative $1,943 million impact on net sales in 2025) directly affect costs and consumer demand.

Costco's strategy of offering low prices on a limited selection of high-quality products, combined with operating efficiencies, allows it to operate profitably at significantly lower gross margins than most retailers. This value proposition is reinforced by a growing membership base and high renewal rates, indicating strong customer loyalty.

The Kirkland Signature brand provides high-quality products at prices generally lower than national brands, contributing to higher margins and differentiating Costco's merchandise. The company plans to continue increasing the sales penetration of these private-label items, enhancing its competitive edge.

The retail industry is highly competitive, with Costco facing rivals across various formats, including online retailers with greater financial resources and technological capabilities (e.g., AI adoption). The company must continuously adapt its pricing, selection, and digital experience to avoid losing market share.

Costco primarily buys merchandise directly from suppliers and routes it through cross-docking consolidation points or directly to warehouses. This process creates freight volume and handling efficiencies, lowering costs associated with traditional multiple-step distribution channels.

The company's warehouse club model, with strict control over entrances and exits and a membership format, results in inventory losses (shrinkage) well below typical retail operations. This efficiency contributes to maintaining low prices and high sales volumes.

Costco believes its warehouses are among the most productive in the retail industry, largely due to employee commitment and operational efficiencies inherent in a warehouse club. This allows for lower labor costs relative to sales volume, despite competitive compensation.

The company is making substantial investments in technology and IT projects, specifically to maintain and enhance its digital resiliency. These systems are crucial for processing high volumes of transactions, tracking inventory, and supporting e-commerce operations, with failure or delay potentially being costly.

E-commerce comparable sales increased 16% in 2025, and digitally-enabled sales (including Costco Travel) represented approximately 10% of total net sales. This indicates successful efforts in developing and leveraging online platforms to offer members convenience and a broader selection of goods.

Costco has implemented comprehensive processes, technologies, and controls based on industry frameworks like NIST CSF, CIS 18, and PCI DSS to assess and manage cybersecurity risks. This includes regular third-party assessments and a dedicated security operations center, demonstrating a proactive approach to protecting its systems and data.

Capital expenditures increased to $5,498 million in 2025 from $4,710 million in 2024, with plans to spend $6,000 million to $6,500 million in fiscal 2026. These investments are primarily directed towards acquiring land, buildings, and equipment for new and remodeled warehouses, information systems, and manufacturing/distribution facilities, supporting future expansion.

The Board approved a 12% increase in the quarterly cash dividend in April 2025, and the company repurchased 943,000 shares for $903 million in 2025 under its $4,000 million authorization. These actions demonstrate management's commitment to returning capital to shareholders and confidence in the company's financial health.

Repayments of long-term debt totaled $103 million in 2025, following a significant $1,077 million repayment in 2024, which included the full $1,000 million outstanding principal balance on its 2.750% Senior Notes. This disciplined approach to debt management helps maintain a strong capital structure.

Costco's philosophy to 'Take Care of Our Employees' is evidenced by competitive compensation and benefits, including a starting wage increase in March 2025 and an average hourly rate of approximately $32.00 for U.S. hourly employees. This approach contributes to a high retention rate of 94% for employees with over one year of service in the U.S. and Canada.

The company actively promotes employee development and internal promotions, with approximately 7,500 hourly employees completing supervisor in training (SIT) programs in 2025. Costco also hosted 'Costco Connects' meetings to foster an inclusive environment where employees feel respected and supported, aligning with its commitment to 'Take Care of Our Employees'.

Costco has set public targets and disclosed intentions for future action regarding sustainability, indicating a commitment to environmental and social responsibility. However, the company acknowledges that failure or perceived failure to meet these ESG goals could result in reputational harm or adversely affect its business, highlighting the importance of these initiatives.

The company recognizes that general economic factors such as inflation, unemployment levels, consumer debt, and housing market weaknesses can adversely affect demand for its products and services. Inflationary factors, including higher merchandise costs, may also impact the ability to adjust prices without negatively affecting consumer demand.

Fluctuations in foreign-exchange rates had a negative impact on net sales of approximately $1,943 million and on net income of $97 million ($0.22 per diluted share) in 2025. As the company continues its international expansion, exposure to these currency risks is expected to increase.

The retail industry remains highly competitive, with factors such as online comparison shopping and competitors' greater financial resources and technological capabilities (e.g., AI adoption) intensifying market pressure. The company must continuously adapt to changing member expectations and new market developments to maintain its competitive position.