Costco Wholesale Corp FY2024 Financial Report: Revenue $254.5B Up 5.0%, Net Income $7.37B

Executive Summary

Costco Wholesale Corporation reported solid financial performance for FY2024, with total revenue reaching $254.5 billion, representing a 5.0% increase from the prior year. Net income attributable to shareholders rose to $7.37 billion, a 17.2% growth driven by higher sales volumes and improved operational efficiencies. The company maintained a strong balance sheet with total assets of $69.83 billion and a healthy liquidity position. Despite macroeconomic headwinds, Costco’s diversified international operations and membership-driven model continue to support stable revenue streams and profitability.

Management Discussion and Analysis (MD&A)

Costco’s strategic focus on expanding its global footprint and enhancing member value has yielded positive results. The increase in revenue was primarily driven by same-store sales growth in core merchandise categories, notably food and sundries, which increased by 5.4%. Operating income improved to $9.29 billion, a 14.6% rise YoY, reflecting effective cost management and higher gross margins. The company’s disciplined capital expenditure of $4.71 billion facilitated store openings and infrastructure upgrades, supporting future growth. The strong cash flow from operations of $11.34 billion underpins ongoing shareholder returns, including dividends and stock buybacks.

Income Statement Analysis

Revenue increased by 5.0%, from $242.3 billion in FY2023 to $254.5 billion in FY2024. Gross profit margin improved slightly due to favorable vendor terms and inventory management, contributing to a gross profit of approximately $32.15 billion. Operating expenses rose modestly, maintaining efficient cost control. Operating income expanded by 14.6%, reaching $9.29 billion. Net income attributable to Costco increased significantly by 17.2%, from $6.29 billion to $7.37 billion, with earnings per share (diluted) rising from $14.16 to $16.56, reflecting both higher net income and share count stability. The company’s net margin improved from 2.6% to 2.9%, indicating enhanced profitability.

Balance Sheet Analysis

Costco’s total assets grew to $69.83 billion, up 1.2% from $68.99 billion, fueled by increases in property and equipment investments and inventory levels. Cash and cash equivalents decreased to $9.91 billion from $13.70 billion, primarily due to share repurchases and dividend payments. Accounts receivable increased to $2.72 billion. Merchandise inventories rose by 11.9%, reaching $18.65 billion, supporting higher sales volume. Total liabilities increased to $46.21 billion, with long-term debt at $5.79 billion, reflecting prudent leverage. Stockholders’ equity declined marginally to $23.62 billion, mainly due to dividend distributions exceeding net income gains, but remains robust with an equity-to-assets ratio of approximately 33.8%. Liquidity remains strong, with a current ratio of approximately 0.97, supported by substantial cash reserves.

Cash Flow Analysis

Net cash provided by operating activities was $11.34 billion, slightly higher than last year, driven by increased net income and working capital contributions. Capital expenditures totaled $4.71 billion, mainly invested in new warehouses and technology infrastructure. The company repurchased 1.004 million shares at an average price of $695.29, reducing outstanding shares and returning value to shareholders. Dividends paid amounted to $8.59 billion, including a special dividend of $15 per share. Financing activities resulted in a net outflow of approximately $10.76 billion, primarily due to share repurchases and dividend payments. Overall, Costco maintained a strong cash position, with net cash decreased by $3.79 billion during FY2024, reflecting strategic capital deployment and ongoing operational cash generation.

Ratios & DuPont Analysis

Costco’s ROE improved notably due to higher net income and effective asset utilization. The asset turnover remained stable, while the equity multiplier slightly decreased, indicating disciplined leverage management. The combined DuPont analysis underscores the company’s enhanced profitability and efficient use of shareholder equity.

Risk Factors

Key risk factors include regulatory challenges across multiple jurisdictions, competitive pressures from e-commerce and specialty retailers, supply chain disruptions, macroeconomic uncertainties affecting consumer spending, and potential legal liabilities from ongoing litigations. Additionally, foreign currency fluctuations and geopolitical risks may impact international operations’ profitability. The company’s self-insurance and reinsurance programs mitigate some operational risks but do not eliminate exposure to substantial claims or regulatory penalties.

Notes & Additional Commentary

Costco’s financials reflect stable core operations with continued investments in international expansion. Notable is the significant increase in net income driven by robust sales growth and expense management. The company’s disciplined capital return policy, including dividends and stock repurchases, remains a key shareholder focus. Unusual items include a $391 million impairment charge related to leased assets in FY2023, which management has addressed with strategic asset revaluation. The elevated merchandise inventory levels indicate confidence in future sales but also warrant monitoring for inventory obsolescence risks. The company’s ongoing legal proceedings and regulatory inquiries should be closely watched, although management believes these will not materially affect long-term profitability.

Investment Implications

Costco’s resilient business model supported by membership revenue and diversified international markets positions it well for steady long-term growth. The recent increase in net income and margins enhances its valuation appeal, especially with strong cash flows enabling shareholder returns. Short-term opportunities include capitalizing on increased consumer demand for value-oriented shopping and e-commerce growth. Long-term risks involve regulatory and legal challenges, potential supply chain constraints, and macroeconomic volatility. Overall, Costco offers a balanced investment profile with stable earnings, prudent leverage, and ongoing strategic expansion, making it suitable for growth-oriented and income-focused investors.