Costco’s September Surprise: What’s Really Driving the Numbers

Costco’s September Surprise: What’s Really Driving the Numbers

The warehouse giant shows 8% sales growth, overcomes tricky comparisons, and redefines its online game

ISSAQUAH, Wash. — Costco rang up $26.58 billion in net sales this September, an 8% jump from last year. On the surface, that sounds good but not extraordinary. Look a little deeper though, and you’ll see the company pulled off an impressive quarter against one of the toughest year-over-year comparisons in recent memory. Investors noticed too — Costco’s stock climbed in after-hours trading and hovered near $915 by Wednesday evening.

The Skewed Baseline From Last Year

Last September was anything but normal. Hurricane Helene drove panic buying across the Southeast, and a three-day port strike on the East and Gulf coasts had shoppers scrambling to stock up. Those events gave Costco an artificial sales bump — about two percentage points higher in the U.S. and 1.5 points globally.

Take away that one-off surge, and this year’s growth looks even stronger. Analysts suggest the underlying sales increase lands closer to 7%. That’s a powerful number at a time when consumer confidence is starting to look shaky. One retail strategist put it bluntly: “When you adjust for last year’s chaos, you see surprisingly resilient demand.”

Costco’s Digital Shift: Bigger Than E-Commerce

One of the biggest changes in Wednesday’s update wasn’t the sales number. It was how Costco now defines its digital business. Instead of tracking only traditional e-commerce sales, the company rolled out a new metric: “digitally-enabled sales.” That means any purchase sparked by a digital interaction counts, whether it’s an online order for warehouse pickup, a same-day Instacart delivery, or even a vacation booked through Costco Travel.

By this broader measure, digital sales jumped 26.1% in September, nearly doubling the 13.6% e-commerce growth reported last quarter. Some of that growth comes from the new definition, but it also reflects real changes in how members shop. Costco is no longer just about treasure-hunting the aisles. Now, you can order groceries on your phone in the morning and pick them up after work, or book your family’s holiday getaway with the same membership.

Of course, the new reporting method creates challenges for Wall Street. Analysts will need to reset their growth models since the new digital yardstick naturally runs hotter than the old one.

Different Markets, Different Stories

Regional results painted an interesting picture. In the U.S., comparable sales rose 5% once you strip out fuel price swings. Solid, yes, but Canada quietly stole the show. Adjusted for currency, sales there grew a whopping 9.3%, though the headline number showed only 6.3%. The weak Canadian dollar, hovering near 1.39 per U.S. dollar in early October, masked that strength when translated back to U.S. dollars.

Elsewhere — from Mexico and Japan to the U.K., Korea, and Australia — comparable sales increased 8.5%, or 7.5% after adjustments. That broad growth shows Costco’s value-first model resonates around the world, regardless of local economic conditions.

Membership Fees: Costco’s Secret Weapon

Behind the sales figures lies Costco’s most reliable money machine: memberships. The company raised annual fees in September 2024, bumping Gold Star memberships to $65 and Executive memberships to $130, while also raising the cash-back reward cap to $1,250. The result? Membership revenue jumped 14% in the fourth quarter.

That’s big because fee income is high-margin and steady, giving Costco financial stability rivals can’t easily match. Executive members — who get 2% back on purchases and perks like early shopping hours — also tend to spend more, which boosts sales in subtle but meaningful ways.

What’s Next on the Retail Horizon

Looking ahead, October may deliver another strong month. Last year’s hurricane-fueled buying spree pulled some demand into September, leaving an easier comparison for October 2024. That sets the stage for mid-to-high single-digit sales growth if trends hold steady.

Digital growth is also worth watching. With the holiday season approaching, same-day delivery, online basket sizes, and Costco Travel bookings could keep “digitally-enabled” sales growing north of 20%. Canada remains a standout too, though currency headwinds may continue to blur its real strength.

Margins will also be a focus. Falling gas prices drag down reported sales but don’t necessarily hurt profit margins. Membership fees, meanwhile, keep providing cushion against rising labor costs and the added complexity of digital fulfillment.

The Competitive Edge Widens

For rivals, Costco’s September performance is a warning shot. The formula of Kirkland Signature products, gas stations that double as traffic drivers, famous $4.99 rotisserie chickens, and now a robust digital offering makes Costco’s moat wider than ever. It’s not just about price — it’s about value, convenience, and loyalty.

Suppliers will need to adapt too. With more online orders being fulfilled straight from warehouses, packaging and logistics requirements are shifting. Vendors who can handle both pallet-sized shipments and single-parcel orders efficiently will win more space on Costco’s shelves.

The Valuation Puzzle

At about $915 per share, Costco trades at nearly 50 times earnings — double the broader market multiple. Investors pay that premium because they see Costco as more than a retailer. Its subscription-like membership income gives it a stability most stores can only dream of.

To justify that valuation, Costco needs to keep delivering high-single-digit sales growth (excluding gas and currency) and mid-teens membership fee increases. A slowdown in either metric could rattle that lofty price.

There’s also the possibility of a special dividend. With $14.2 billion in cash and very little debt, Costco has the firepower to surprise shareholders with a one-off payout. It’s happened before, though no announcement has been made yet.

Bottom Line

Costco just proved it can grow even when the odds are stacked against it. September’s results weren’t just about raw numbers — they showed the company can adapt, redefine itself digitally, and still lean on its rock-solid membership model. The next test will be October’s sales report. If growth accelerates, it’ll confirm Costco isn’t just riding out last year’s distortions. It’s building lasting momentum in a retail world where staying relevant has never been harder.

House Investment Thesis

Category	Details
September Comp Sales	Reported: +5.7% Ex-Gas & FX: +6.0% Normalized (Adj. for Last Year's Boost): ~7.0%
Digital Sales (New KPI)	Digitally-Enabled Sales: +26.0% (New definition includes warehouse-fulfilled, same-day partners, and Costco Travel)
Key Regional Performance	Canada Ex-Gas & FX: +9.3% (shows underlying demand strength)
Membership Metrics	Fee Hike: Gold Star $65, Executive $130 (Sept 2024) FY'25 Membership Fees: $5.3B (+10% YoY) Renewal Rate: Record High
Physical Expansion	Clubs at FY'25 End: 914 (steady new-unit growth is a structural revenue driver)
Valuation	TTM P/E: ~50-52x Forward P/E: ~46x (Significant premium to market ~28x)
Investment Thesis (Bull Case)	• Quality comp on a tough, artificially high base. • Strong digital growth with new, broader KPI. • Strong membership economics and renewal rates. • Canada ex-FX shows robust underlying demand.
Risks & Considerations (Bear Case)	• New "digitally-enabled" KPI is not directly comparable to old e-comm; requires model re-baselining. • FX (strong USD) and lower gas prices create headwinds for reported comps optics. • Execution complexity from extended hours and digital fulfillment may pressure SG&A. • High valuation multiple requires consistent high-single-digit comps and membership growth to be sustained.
Analyst's Base Case & Outlook	• October Comps: Expected to accelerate to mid/high-single-digits. • Digital: To remain >+20% through holidays. • Strategy: Prefer to "own dips" rather than chase the current price. • Catalysts: Watch for special dividend potential given cash build ($14.2B).

NOT INVESTMENT ADVICE