Costco Counters Tariffs with Strategic Sourcing and Bulk Orders

Membership-only retailer Costco Wholesale (COST) reported its third quarter fiscal 2025 results yesterday, marginally outpacing expectations for both earnings and sales. The company said that consumers are pre-ordering goods and making bulk purchases in anticipation of future tariffs. This has helped the retailer to avoid raising prices and maintain its “competitive price position.”

CEO Ron Vachris noted that, “We’re watching pricing daily, if not hourly, on every key commodity.” Notably, 8% of Costco’s goods sold in the U.S. are imported from China, with nearly one-third coming from other countries. Consumers have already stocked up on many summer goods such as patio furniture and sporting equipment, helping Costco to maintain stable prices on them.

Here’s How Costco Is Mitigating Tariff Impact

In the post earnings call, the company noted that it has pulled forward shipments of certain goods to mitigate the potential impact of tariffs this summer. Costco is also re-routing goods sourced from countries facing heavy tariff burdens to its non-U.S. markets. Effectively, it is importing goods into the U.S. from those countries with minimal tariffs. It has also been able to lower prices on essential items like eggs, butter, and olive oil.

Costco is also working on shifting production of goods to countries with lower tariffs. Meanwhile, its private-label goods, which offer better value for money, are being preferred over more expensive goods. This, coupled with bulk purchases by customers, has helped Costco deliver solid comparable sales and exceed expectations.

Costco has previously stated that raising prices of its products would be a “last resort,” and the company is living up to that promise, while peers Walmart (WMT) and Target (TGT) are struggling to strategize effectively. Costco saw high-single-digit same-store sales in the fresh food category and double-digit growth in meat. Plus, discretionary items such as jewelry, home furnishings, small electronic goods, and apparel witnessed high-single-digit growth. Overall, Costco is proving its expertise by avoiding price hikes and attracting customers to its wholesale offerings.

Is COST Stock a Buy?

Analysts remain divided on Costco’s long-term stock trajectory due to the uncertainty surrounding tariffs. On TipRanks, COST stock has a Moderate Buy consensus rating based on 17 Buys and seven Hold ratings. Also, the average Costco Wholesale price target of $1,077 implies 6.8% upside potential from current levels. Year-to-date, COST stock has gained 10.2%.

Please note that these ratings were given before Costco’s Q3 print and are subject to change once analysts revisit their views on the stock.

See more COST analyst ratings