Editor’s Note
Costco’s latest earnings report highlights a significant strategic shift, with digital commerce sales accelerating to become a primary driver of growth. This underscores how the retail giant is successfully scaling its online operations to complement its formidable warehouse footprint.
Costco Wholesale Corporation (COST) reported strong third-quarter fiscal 2025 results, with digital commerce emerging as a key growth engine. Net sales increased 8% year over year to $62 billion. In July, e-commerce remained a bright spot, notching a 15.1% gain or 14.9% on an adjusted basis. This acceleration underscores Costco’s growing ability to complement its traditional warehouse strength with digital scale.
Digital momentum was clear across multiple measures. Website traffic rose 20% in the third quarter, average order value increased 3%, and Costco Logistics boosted deliveries of big and bulky items by 31%. Categories such as gold and jewelry, toys, health and beauty, and home furnishings saw double-digit online gains, signaling that members are increasingly comfortable purchasing higher-value products digitally.
Several initiatives fueled this growth. Costco’s new partnership with Affirm introduced Buy Now, Pay Later financing, making large-ticket items like furniture and appliances more accessible. Personalized product recommendation tools and the expanding Costco Next marketplace also enhanced the member experience. These efforts strengthen Costco’s digital ecosystem without undermining its value-first philosophy.
At the same time, physical stores continue to perform strongly. Companywide comparable sales rose 5.7%, with U.S. traffic up 5.5%. Membership renewal rates remained elevated at 92.7% in the United States and Canada, highlighting continued loyalty even as digital adoption grows. The balance between warehouses and e-commerce remains one of Costco’s key advantages.
Costco’s online business is evolving into a durable pillar of expansion, reinforcing its leadership across both physical retail and digital commerce.
Walmart Inc. (WMT) delivered a 25% jump in global e-commerce sales in second-quarter fiscal 2026, with U.S. digital sales up 26%. Growth was fueled by store-fulfilled pickup and delivery, which jumped nearly 50%, with one-third of orders arriving within three hours and 20% within 30 minutes. Marketplace sales advanced nearly 20%. Walmart also raised its full-year sales growth outlook to 3.75-4.75%.
Sprouts Farmers Market (SFM) saw 27% e-commerce growth in the second quarter of fiscal 2025, representing nearly 15% of the total sales. Growth was driven across digital partners, including Instacart, DoorDash, Uber Eats and its platform. Sprouts Farmers is also betting on its new Sprouts Rewards loyalty program to accelerate this momentum.
The COST stock has been a standout performer, with shares rallying 7.4% over the past year, outpacing the industry’s growth of 3.3%.
From a valuation standpoint, Costco’s forward 12-month price-to-earnings ratio stands at 48.19, higher than the industry’s ratio of 32.34. COST carries a Value Score of A.
The Zacks Consensus Estimate for Costco’s current financial-year sales and earnings per share implies year-over-year growth of 8.1% and 11.6%, respectively.
Costco currently carries a Zacks Rank #4 (Sell).
