Costco Wholesale Corporation operates membership warehouses and e-commerce sites based on the concept of offering low prices on a limited selection of nationally-branded and private-label products to produce high sales volumes and rapid inventory turnover. The company operates in the retail industry, specifically membership warehouse clubs, and competes with global, national, and regional wholesalers and retailers including supermarkets, supercenters, online retailers, gasoline stations, hard discounters, department and specialty stores, and operators selling a single category or narrow range of merchandise. Significant general merchandise retail competitors in the U.S. include Walmart, Target, Kroger, and Amazon, and the company also competes with other warehouse clubs including Walmart's Sam's Club and BJ's Wholesale Club in the U.S.

Costco's competitive positioning is built on offering low prices, high-quality merchandise, and a membership model that reinforces member loyalty. The company's competitive advantages include volume purchasing, efficient distribution, reduced handling of merchandise in no-frills, self-service warehouse facilities, and operating profitably at significantly lower gross margins than most other retailers. The company carries less than 4,000 active SKUs per warehouse in its core warehouse business, significantly less than other broadline retailers, and averages from 9,000 to 10,000 SKUs online. The company's private-label brand, Kirkland Signature, is considered high quality, offered at prices generally lower than national brands, and helps lower costs, differentiate merchandise offerings, and generally earn higher margins.

Costco generates revenue through net sales of merchandise and membership fees. The membership format is integral to the business and profitability, designed to reinforce member loyalty and provide continuing fee revenue. The company's annual membership fee in the U.S. is $65 ¹, and Executive memberships are available for an additional annual fee of $65 ² in the U.S. Executive members earn a 2% reward on qualified purchases, generally up to a maximum reward of $1,250 ³ per year. The sales penetration of Executive members represented approximately 73.6% ⁴ of worldwide net sales in 2025. The company's member renewal rate was 92.3% ⁵ in the U.S. and Canada and 89.8% ⁶ worldwide at the end of 2025.

Costco offers merchandise and services in core merchandise categories including Foods and Sundries (sundries, dry grocery, candy, cooler, freezer, liquor, and tobacco), Non-Foods (major appliances, small electronics, health and beauty aids, hardware, lawn and garden, sporting goods, tires, toys and seasonal, automotive, stamps, tickets, apparel, furniture, domestics, housewares, special order kiosk, and jewelry), and Fresh Foods (meat, produce, deli, and bakery). The company also operates warehouse ancillary businesses including gasoline, pharmacy, optical, food court, hearing aids, and tire installation, and other businesses including e-commerce, business centers, travel, and other. The company operated 747 ⁷ gas stations at the end of 2025, and the gasoline business represented approximately 10% ⁸ of total net sales in 2025. Net sales for e-commerce represented approximately 7% ⁹ of total net sales in 2025, and digitally-enabled sales, which includes sales delivered to members initiated through a digital device whether fulfilled through a warehouse or distribution center as well as Costco Travel, represented approximately 10% ¹⁰ of total net sales in 2025.

In fiscal 2025, net sales by merchandise category were: Foods and Sundries $109,564 ¹¹, Non-Foods $71,190 ¹², Fresh Foods $37,988 ¹³, and Warehouse Ancillary and Other Businesses $51,170 ¹⁴. Membership fee revenue was $5,323 ¹⁵ in 2025, compared to $4,828 ¹⁶ in 2024. Total paid members at the end of 2025 were 81,000,000 ¹⁷, consisting of 68,300,000 ¹⁸ Gold Star members and 12,700,000 ¹⁹ Business members including affiliates, with total cardholders of 145,200,000 ²⁰. Executive members represented 38,700,000 ²¹ of total paid members in 2025.

During fiscal 2025, the company opened 27 ²² new warehouses, including three relocations, for a total of 24 ²³ net new warehouses: 15 ²⁴ in the U.S., two ²⁵ in Canada, and seven ²⁶ in Other International. In April 2025, the Board of Directors approved a 12% ²⁷ increase in the quarterly cash dividend, from $1.16 ²⁸ to $1.30 ²⁹ per share. The company also increased the starting wage by $0.50 ³⁰ an hour to at least $20.00 ³¹ for all entry-level positions in the U.S. and Canada in March 2025, and increased the top of wage scales by $1.00 ³² per hour, bringing the average hourly rate at the end of 2025 for hourly employees in the U.S. to approximately $32.00 ³³ per hour.

Total revenue for fiscal 2025 was $275,235 ³⁴, compared to $254,453 ³⁵ in fiscal 2024. Net sales increased 8% ³⁶ to $269,912 ³⁷, driven by an increase in comparable sales and sales at new warehouses. Net income increased 10% ³⁸ to $8,099 ³⁹, or $18.21 ⁴⁰ per diluted share compared to $7,367 ⁴¹, or $16.56 ⁴² per diluted share in 2024. Gross margin percentage increased 20 ⁴³ basis points, and SG&A expenses as a percentage of net sales increased 11 ⁴⁴ basis points. Net cash provided by operating activities was $13,335 ⁴⁵ in 2025, compared to $11,339 ⁴⁶ in 2024.

However, management stated its current intention to spend $6,000 to $6,500 ⁴⁷ during fiscal 2026 on capital expenditures, and plans to open up to 35 ⁴⁸ new warehouses, including five relocations, in 2026.

A primary growth vector is the expansion of the warehouse base, particularly in international markets where the rate of square footage growth is generally higher due to the smaller base in those markets. The company opened 27 ⁴⁹ new warehouses in 2025 and plans to open up to 35 ⁵⁰ new warehouses in 2026. The company also seeks to expand in existing markets to attain greater overall market share, though new warehouses may draw members away from existing locations and adversely affect their comparable sales performance. The company operates e-commerce sites in the U.S., Canada, Mexico, the U.K., Korea, Taiwan, Japan, and Australia, and e-commerce net sales represented approximately 7% ⁵¹ of total net sales in 2025, with digitally-enabled sales representing approximately 10% ⁵² of total net sales.

Another growth vector is the continued penetration of Executive memberships, which represented approximately 73.6% ⁵³ of worldwide net sales in 2025. The company increased annual membership fees in the U.S. and Canada effective September 1, 2024, and the fee income increase accounted for approximately 40% ⁵⁴ of membership income growth during 2025. The company also expects to continue to increase the sales penetration of its private-label Kirkland Signature items, which generally carry higher margins than national brand products.

Gross margin percentage increased 20 ⁵⁵ basis points in 2025, and excluding the impact of gasoline price deflation on net sales, gross margin percentage was 11.03% ⁵⁶, an increase of 11 ⁵⁷ basis points. SG&A expenses as a percentage of net sales increased 11 ⁵⁸ basis points, and excluding the impact of gasoline price deflation was 9.17% ⁵⁹, an increase of three ⁶⁰ basis points. The company's financial performance depends heavily on controlling costs, though some significant costs are partially outside its control, particularly health care and utility expenses.

The company's primary requirements for capital are acquiring land, buildings, and equipment for new and remodeled warehouses, information systems, and manufacturing and distribution facilities. In 2025, the company spent $5,498 ⁶¹ on capital expenditures, and it is the current intention to spend $6,000 to $6,500 ⁶² during fiscal 2026. The company's stock repurchase program is conducted under a $4,000 ⁶³ authorization approved by the Board of Directors in January 2023, which expires in January 2027. During 2025, the company repurchased 943,000 ⁶⁴ shares of common stock at an average price per share of $957.66 ⁶⁵, totaling approximately $903 ⁶⁶. The remaining amount available to be purchased under the approved plan was $1,962 ⁶⁷ at the end of 2025. Cash dividends declared in 2025 totaled $2,183 ⁶⁸ or $4.92 ⁶⁹ per share, and the current quarterly dividend rate is $1.30 ⁷⁰ per share.

The company faces structural headwinds including the impact of changes in foreign currencies relative to the U.S. dollar, which negatively impacted net sales by approximately $1,943 ⁷¹ or 78 ⁷² basis points in 2025, and negatively impacted net income by $97 ⁷³, or $0.22 ⁷⁴ per diluted share. Lower gasoline prices negatively impacted net sales by $2,329 ⁷⁵ or 93 ⁷⁶ basis points in 2025. The company also faces headwinds from higher tariffs, which the filing states are more likely to adversely impact rather than improve results. The company's California operations comprised 26% ⁷⁷ of U.S. net sales in 2025, and any substantial slowing or sustained decline in these operations could materially adversely affect the business.

The company's international operations, including Canada, generated 27% ⁷⁸ and 34% ⁷⁹ of net sales and operating income in 2025. The company operated 285 ⁸⁰ warehouses outside of the U.S. at the end of 2025, representing 31% ⁸¹ of all warehouse locations. Future operating results internationally could be negatively affected by political and economic conditions, regulatory constraints, currency regulations, policy changes, and other matters in any of the countries or regions in which the company operates.

The company's U.S. and Canadian operations comprised 86% ⁸² and 84% ⁸³ of net sales and operating income in 2025. The company is highly dependent on the financial performance of these operations, and any substantial slowing or sustained decline could materially adversely affect the business. The company also faces risks from inflation, which may adversely affect merchandise costs, and the company may not be able to adjust prices to sufficiently offset cost increases without negatively impacting consumer demand.

Management's message emphasizes the company's commitment to its core strategy of providing members with quality goods and services at competitive prices, and not focusing in the short-term on maximizing prices charged but instead seeking to maintain a perception among members of pricing authority. Key themes include driving comparable sales growth through making available the right merchandise at the right prices, controlling costs while maintaining compensation levels better than industry average, and expanding the membership base. Management highlights that the most important driver of profitability is increasing net sales, particularly comparable sales, and that generating comparable sales growth is foremost a question of making available the right merchandise at the right prices, a skill the company believes it has repeatedly demonstrated over the long-term. Management also emphasizes the membership format as integral to the business and profitability, designed to reinforce member loyalty and provide continuing fee revenue. The company's philosophy is not to seek to minimize employee wages and benefits, but rather to achieve longer-term objectives of reducing employee turnover, increasing productivity, and enhancing employee satisfaction by maintaining compensation levels better than the industry average. Management states that the company's current intention is to spend $6,000 to $6,500 ⁹⁰ during fiscal 2026 on capital expenditures and to open up to 35 ⁹¹ new warehouses, including five relocations, in 2026.

Total revenue for fiscal 2025 was $275,235 ⁹², compared to $254,453 ⁹³ in fiscal 2024. Net sales were $269,912 ⁹⁴ in 2025 versus $249,625 ⁹⁵ in 2024. Net income was $8,099 ⁹⁶ in 2025, compared to $7,367 ⁹⁷ in 2024. Diluted earnings per share were $18.21 ⁹⁸ in 2025 versus $16.56 ⁹⁹ in 2024. Operating income was $10,383 ¹⁰⁰ in 2025, compared to $9,285 ¹⁰¹ in 2024. Gross margin percentage was 11.12% ¹⁰² in 2025, compared to 10.92% ¹⁰³ in 2024. SG&A expenses as a percentage of net sales were 9.25% ¹⁰⁴ in 2025 versus 9.14% ¹⁰⁵ in 2024. The effective tax rate was 25.1% ¹⁰⁶ in 2025, compared to 24.4% ¹⁰⁷ in 2024. Net cash provided by operating activities was $13,335 ¹⁰⁸ in 2025 versus $11,339 ¹⁰⁹ in 2024. Cash and cash equivalents and short-term investments were $15,284 ¹¹⁰ at August 31, 2025, compared to $11,144 ¹¹¹ at September 1, 2024. Long-term debt, excluding current portion, was $5,713 ¹¹² at the end of 2025. The company recorded a $142 ¹¹³ charge to merchandise costs to increase the cumulative LIFO valuation on merchandise inventories due to higher merchandise costs in 2025. The U.S. segment generated total revenue of $200,046 ¹¹⁴ and operating income of $6,878 ¹¹⁵ in 2025. The Canada segment generated total revenue of $36,923 ¹¹⁶ and operating income of $1,849 ¹¹⁷. The Other International segment generated total revenue of $38,266 ¹¹⁸ and operating income of $1,656 ¹¹⁹.

The company is highly dependent on its U.S. and Canadian operations, which comprised 86% ⁸⁴ and 84% ⁸⁵ of net sales and operating income in 2025, and within the U.S., is highly dependent on California operations, which comprised 26% ⁸⁶ of U.S. net sales. A substantial slowing or sustained decline in these operations could materially adversely affect the business. The company faces strong competition from other retailers and warehouse club operators, including Walmart, Target, Kroger, Amazon, Sam's Club, and BJ's Wholesale Club, and the evolution of online and mobile channels has enhanced competition. The company is subject to risks from fluctuations in foreign-exchange rates, as international operations generated 27% ⁸⁷ and 34% ⁸⁸ of net sales and operating income in 2025, and a hypothetical 10% strengthening of functional currencies compared to non-functional currency exchange rates at August 31, 2025 would have decreased the fair value of forward foreign-exchange contracts by approximately $117 ⁸⁹. The company is also subject to risks from higher tariffs, which the filing states are more likely to adversely impact rather than improve results, and from inflation in merchandise costs, where the company may not be able to adjust prices to sufficiently offset cost increases without negatively impacting consumer demand.