Can Costco's Affirm Tie-Up Accelerate Digital Sales in Q4?

Costco Wholesale Corporation’s COST partnership with Affirm to offer "Buy Now, Pay Later" (BNPL) financing has the potential to boost digital sales, particularly for big-ticket items such as appliances, furniture and consumer electronics. The strategy is a direct investment in improving the digital member experience. With inflation still pressuring discretionary spending, BNPL can lower psychological purchase barriers, especially for budget-conscious households.

The timing of this initiative aligns well with Costco’s rapidly expanding digital ecosystem. E-commerce comparable sales jumped 14.8% in the third quarter of fiscal 2025. Website traffic surged 20%, while average order values ticked up 3%. Costco Logistics saw a 31% year-over-year increase in big and bulky e-commerce deliveries in the last reported quarter, an area where BNPL may further accelerate adoption. 

The Affirm partnership is a significant component of Costco’s broader effort to enhance its digital and technology capabilities, aiming to drive future sales growth. By offering flexible monthly payment options, Costco is making its higher-value products more accessible, potentially broadening its customer base and deepening member loyalty. The success of this initiative is crucial for sustaining the strong digital sales growth into the fourth quarter and beyond. 

As members become more familiar with this financing option, it could notably boost average order values and enhance e-commerce performance. We note that e-commerce comparable sales increased 15.1% in July. This growth builds on June’s 11.5% and May’s 11.6% gains, underscoring ongoing strength in Costco’s digital channel.

How Are Costco Rivals WMT & AMZN Approaching?

While Costco’s BNPL rollout is in its nascent stage, competitors like Walmart Inc. WMT and Amazon.com, Inc. AMZN have already embedded installment options into their ecosystems. Walmart offers BNPL both online and in-store, with a particular focus on seasonal items and electronics. This move aligns with Walmart's broader strategy to boost its e-commerce presence and cater to a growing base of price-sensitive consumers.

Amazon has introduced Amazon Pay Later, allowing shoppers to break up their purchases into convenient monthly payments. The service aims to reduce the burden of paying the full amount upfront, giving customers easier access to higher-priced items while helping them manage their budgets more effectively.

What Latest Metrics Say About Costco

Costco stock has been a standout performer, with shares rallying 11.4% over the past year, outpacing the industry’s growth of 7.7%. 
 

From a valuation standpoint, Costco's forward 12-month price-to-earnings ratio stands at 48.96, higher than the industry’s ratio of 32.67. COST carries a Value Score of D.
 

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 #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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