How Did International Comps Boost Costco's Q3 Growth Story?

Costco Wholesale Corporation’s COST third-quarter fiscal 2025 results underscored the growing impact of international operations on overall comparable sales performance. Adjusted for gasoline prices and foreign exchange, total company comparable sales rose 8%. The “Other International” segment, which includes regions outside the United States and Canada, delivered a standout 8.5% adjusted comparable sales increase, surpassing both the United States (up 7.9%) and Canada (up 7.8%).

Traffic in international warehouses climbed 4.8%, closely trailing the company-wide average of 5.2% and indicating solid engagement across newer markets. Moreover, the adjusted average ticket internationally rose 3.6%. These figures highlight the burgeoning strength of Costco's footprint beyond its domestic market. 

Management emphasized that a shift toward more localized sourcing has supported margin preservation and pricing agility abroad. For instance, sourcing Kirkland Signature laundry products within Asia allowed for a 40% price reduction in those markets, strengthening member value while navigating tariff complexity. The strategy of rerouting tariff-sensitive goods to non-U.S. regions also helped optimize inventory deployment and margin outcomes.

That said, international markets were a key pillar of Costco’s third-quarter performance. While often overshadowed by U.S. operations, the Other International regions highlight the effectiveness of the company’s globally coordinated yet locally tailored model. Even amid shifting trade dynamics, this approach continues to unlock consistent sales momentum. Adjusted comparable sales for Other International regions remained strong in May, rising 8.4%.

Sales Scorecard: How DG and TGT Stack Up Against Costco

Dollar General Corporation DG reported a 2.4% increase in first-quarter fiscal 2025 same-store sales, driven by a 2.7% rise in the average transaction amount, though partially offset by a 0.3% decline in customer traffic. Dollar General witnessed growth across all key product categories, including consumables, seasonal, home products and apparel. Dollar General now expects same-store sales to rise between 1.5% and 2.5% compared to its prior forecast of 1.2% to 2.2%.

Target Corporation TGT experienced a 3.8% decline in comparable sales, following a 1.5% increase in the preceding quarter. This drop was attributed to a 5.7% fall in Target’s comparable store sales, which was somewhat offset by a 4.7% increase in comparable digital sales. Target highlighted that traffic, or the number of transactions, dropped 2.4%, and the average transaction amount decreased 1.4%.

Costco’s Price Performance, Valuation and Estimates

Costco stock has been a standout performer, with shares rallying 16.5% in the past year, outpacing the industry’s growth of 7.2%. 
 

From a valuation standpoint, Costco's forward 12-month price-to-earnings ratio stands at 50.34, higher than the industry’s ratio of 32.3. 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 12%, 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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