Company: COST
Filing Date: 2025-06-05
Form Type: 10-Q
Source: 0000909832-25-000033
Chunk: 52

Company: COSTCO WHOLESALE CORP /NEW
Filing Date: 2025-06-05
Form: 10-Q
Item: Item 8
Chunk 52
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Membership fee revenue increased 10% and 9% in the third quarter and first thirty-six weeks of 2025, primarily driven by new member sign-ups and membership fee increases. At the end of the third quarter of 2025, our renewal rates were 92.7% in the U.S. and Canada and 90.2% worldwide. Our renewal rates were negatively impacted by sign-ups from a digital promotion in the fall of 2023 entering the renewal calculation this quarter and higher penetration of online sign-ups in recent years. Our renewal rate, which excludes affiliates of Business members, is a trailing calculation that captures renewals during the period seven to eighteen months prior to the reporting date.

As previously reported, we increased our annual membership fees in the U.S. and Canada, effective September 1, 2024. We account for membership fee revenue on a deferred basis, recognized ratably over the one-year membership period. The fee increase contributed approximately 4% of membership fee revenue during the third quarter of 2025.

Gross Margin12 Weeks Ended36 Weeks EndedMay 11,2025May 12,2024May 11,2025May 12,2024Net sales$61,965 $57,392 $185,480$171,440Less merchandise costs54,996 51,173 164,849152,770Gross margin$6,969 $6,219 $20,631$18,670Gross margin percentage11.25 %10.84 %11.12 %10.89 %

Quarterly Results

Gross margin percentage increased 41 basis points. Excluding the impact of gasoline price deflation on net sales, gross margin percentage increased to 11.13%, 29 basis points. This increase was positively impacted by 27 basis points in our core merchandise categories, primarily in fresh foods and foods and sundries and 27 basis points in warehouse ancillary and other businesses, primarily gasoline and e-commerce. Gross margin was negatively impacted by 23 basis points due to a LIFO charge for higher merchandise costs and two basis points for a one-time expense for increased employee vacation. Changes in foreign currencies relative to the U.S. dollar negatively impacted gross margin by approximately $80, compared to the third quarter of 2024, attributable to our Other International and Canadian operations.

The gross margin in core merchandise categories, when expressed as a percentage of core merchandise sales (rather than total net sales),