What changed in this filing

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Item 1. Business

2025-10-08 compared with 2024-10-09 · 67 added, 61 removed, 128 unchanged (50% of the section changed)

1 unchanged sentence

Costco Wholesale Corporation and its subsidiaries (Costco or the Company) began operations in 1983, in Seattle, Washington.

We are principally engaged in the operation of membership warehouses in the United States (U.S.) and Puerto Rico, Canada, Mexico, Japan, the United Kingdom (U.K.), Korea, Australia, Taiwan, China, Spain, France, Iceland, New Zealand, and Sweden.

Costco operated 890, 861, and 838 warehouses worldwide at September 1, 2024, September 3, 2023, and August 28, 2022.

Costco operated 914, 890, and 861 warehouses worldwide at August 31, 2025, September 1, 2024, and September 3, 2023.

The Company operates e-commerce sites in the U.S., Canada, Mexico, the U.K., Korea, Taiwan, Japan, and Australia.

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The material seasonal impact in our operations is increased net sales and earnings during the winter holiday season.

References to 2024 and 2022 relate to the 52-week fiscal years ended September 1, 2024, and August 28, 2022.

References to 2025 and 2024 relate to the 52-week fiscal years ended August 31, 2025, and September 1, 2024.

References to 2023 relate to the 53-week fiscal year ended September 3, 2023.

We operate membership warehouses and e-commerce sites based on the concept that offering our members low prices on a limited selection of nationally-branded and private-label products in a wide range of categories will produce high sales volumes and rapid inventory turnover.

We operate membership warehouses and e-commerce sites based on the concept that offering low prices on a limited selection of nationally-branded and private-label products in a wide range of categories will produce high sales volumes and rapid inventory turnover.

When combined with the operating efficiencies achieved by volume purchasing, efficient distribution and reduced handling of merchandise in no-frills, self-service warehouse facilities, these volumes and turnover enable us to operate profitably at significantly lower gross margins (net sales less merchandise costs) than most other retailers.

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Our depots receive large shipments from suppliers and quickly ship these goods to warehouses.

This process creates freight volume and handling efficiencies, lowering costs associated with traditional multiple-step distribution channels.

This process creates freight volume and handling efficiencies, lowering

costs associated with traditional multiple-step distribution channels.

Our e-commerce operations ship merchandise through our depots and logistics operations, as well as through drop-ship and other delivery arrangements with our suppliers.

Our average warehouse space is approximately 147,000 square feet, with newer units being slightly larger.

Floor plans are designed for economy and efficiency in the use of selling space, the handling of merchandise, and the control of inventory.

Floor plans are designed for efficiency in the use of selling space, the handling of merchandise, and the control of inventory.

Because shoppers are attracted principally by the quality of merchandise and low prices, our warehouses are not elaborate.

By strictly controlling the entrances and exits and using a membership format, we believe our inventory losses (shrinkage) are well below those of typical retail operations.

Our warehouses on average operate on a seven-day, 70-hour week.

Gasoline operations generally have extended hours.

Because the hours of operation are shorter than many other retailers, and due to other efficiencies inherent in a warehouse-type operation, we believe labor costs are lower relative to the volume of sales.

Our operating hours are shorter than many other retailers, and due to other efficiencies inherent in a warehouse club operation, we believe labor costs are lower relative to the volume of sales.

In the U.S., we recently added exclusive shopping hours for our Executive members and our gasoline operations generally have extended hours.

Merchandise is generally stored on racks above the sales floor and displayed on pallets containing large quantities, reducing labor required.

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We carry less than 4,000 active stock keeping units (SKUs) per warehouse in our core warehouse business, significantly less than other broadline retailers.

We average anywhere from 9,000 to 10,000 SKUs online, some of which are available in our warehouses.

We average from 9,000 to 10,000 SKUs online, some of which are available in our warehouses.

Many consumable products are offered for sale in case, carton, or multiple-pack quantities only.

To promote member satisfaction, we generally accept returns of merchandise.

On certain electronic items, we typically have a 90-day return policy and provide, free of charge, technical support services, as well as an extended warranty.

Additional third-party warranty coverage is sold on certain electronic items.

On certain electronic items, we have a 90-day return policy and provide, free of charge, technical support services, as well as an extended warranty.

Additional third-party warranty coverage is sold on certain electronic items and major appliances.

We offer merchandise and services in the following categories:

■ Core Merchandise Categories (or core business):

• Foods and Sundries (including sundries, dry grocery, candy, cooler, freezer, deli, liquor, and tobacco)

• Non-Foods (including major appliances, small electronics, health and beauty aids, hardware, lawn and garden, sporting goods, tires, toys and seasonal, office supplies, automotive, stamps, tickets, apparel, furniture, domestics, housewares, special order kiosk, and jewelry)

• Fresh Foods (including meat, produce, service deli, and bakery)

■ Core Merchandise Categories:

• Foods and Sundries (including sundries, dry grocery, candy, cooler, freezer, liquor, and tobacco)

• Non-Foods (including major appliances, small electronics, health and beauty aids, hardware, lawn and garden, sporting goods, tires, toys and seasonal, automotive, stamps, tickets, apparel, furniture, domestics, housewares, special order kiosk, and jewelry)

• Fresh Foods (including meat, produce, deli, and bakery)

■ Warehouse Ancillary (includes gasoline, pharmacy, optical, food court, hearing aids, and tire installation)

■ Other Businesses (includes e-commerce, business centers, travel, and other)

Warehouse ancillary operate primarily within or next to our warehouses, encouraging members to shop more frequently.

The number of warehouses with gas stations varies significantly by country, and we have no gasoline business in Korea or Sweden.

Warehouse ancillary operate primarily within, next to or near our warehouses, encouraging more frequent shopping.

The number of warehouses with gas stations varies significantly by country.

We operated 747 gas stations at the end of 2025.

Our gasoline business represented approximately 10% of total net sales in 2025.

Our other businesses sell products and services that complement our warehouse operations.

Our other businesses sell products and services that largely complement our warehouse operations.

Our e-commerce operations give members convenience and a broader selection of goods and services.

Net sales for e-commerce represented approximately 7% of total net sales in 2025.

Digitally originated sales, which represents sales that a member initiates through a digitally enabled device, including e-commerce, business delivery, travel, and same-day grocery, represented approximately 9% of total net sales in 2024.

Our business centers carry items tailored specifically for food services, convenience stores and offices, and offer walk-in shopping and deliveries.

Digitally-enabled sales,

which represents sales delivered to members that are initiated through a digital device, whether fulfilled through a warehouse or distribution center, as well as Costco Travel, represented approximately 10% of total net sales in 2025.

Our business centers carry items tailored for food services, convenience stores and offices and offer walk-in shopping and deliveries.

Business centers are included in our total warehouse count.

Costco Travel offers vacation packages, car rentals, cruises and other travel products exclusively for Costco members (offered in the U.S., Canada, and the U.K.).

Costco Travel offers vacation packages, car rentals, cruises and other travel products exclusively for Costco members (offered to varying degrees in the U.S., Canada, Australia, and the U.K.).

We have direct relationships with many producers of brand-name merchandise.

We do not obtain a significant portion of merchandise from any one supplier.

When sources of supply become unavailable, we seek alternatives.

To ensure sufficient product supply for future growth, we pursue diversification in our supply-chain management and seek to expand in-country production.

When sources of supply become unavailable, we seek alternative sources or items.

For future product supply need, we pursue diversification in our supply-chain and seek to expand in-country production.

We also purchase and manufacture private-label merchandise, as long as quality and member demand are high and the value to our members is significant.

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Gold Star memberships are available to individuals;

Business memberships are limited to businesses, including individuals with a business license, retail sales license, or comparable document.

Business memberships are limited to businesses, including individuals with a business license or comparable document.

Business members may add additional cardholders (affiliates), to which the same annual fee applies.

Affiliates are not available for Gold Star members.

During fiscal 2024, our annual fee for these memberships was $60 in the U.S.

Our annual fee for these memberships is $65 in the U.S.

and varies in other countries.

All paid memberships include a free household card.

Paid members (except affiliates) were eligible to upgrade to an Executive membership in the U.S., for an additional annual fee of $60.

Paid members (except affiliates) are eligible to upgrade to an Executive membership in the U.S., for an additional annual fee of $65.

Executive memberships are also available in Canada, Mexico, the U.K., Japan, Korea, Taiwan, and Australia, for which the additional fee varies.

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The sales penetration of Executive members represented approximately 73.6% of worldwide net sales in 2025.

Our member renewal rate was 92.9% in the U.S.

and Canada and 90.5% worldwide at the end of 2024.

The majority of members renew within six months following their renewal date.

Our renewal rate, which excludes affiliates of Business members, is a trailing calculation that captures renewals during the period seven to eighteen months prior to the reporting date.

Our membership counts include active memberships as well as memberships that have not renewed within the 12 months prior to the reporting date.

Our membership was made up of the following (in thousands):

Membership at the end of 2025, 2024, and 2023 was made up of the following (in thousands):

2025 2024 2023

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(1) Executive members represented 38,700, 35,400, and 32,300 of total paid members in 2025, 2024, and 2023.

Effective September 1, 2024, we increased our membership fees in the U.S.

and Canada for Gold Star, Business, and Business affiliates to $65 per year.

The Executive membership fee increased from $120 to $130 (membership fee of $65, plus Executive upgrade of $65), and the maximum annual 2% reward associated with the Executive Membership increased from $1,000 to $1,250.

These membership counts include active memberships as well as memberships that have expired and not renewed within the 12 months prior to the reporting date.

These expired memberships make up a small percentage of these membership counts, and many of them are subsequently renewed.

Our member renewal rate was 92.3% in the U.S.

and Canada and 89.8% worldwide at the end of 2025.

That rate, which excludes affiliates of Business members, is a trailing calculation that captures renewals during the period seven to eighteen months prior to the reporting date.

Memberships that have an expiration date in the six months prior to the end of our reporting period are excluded from this calculation, regardless of whether or not they have been renewed.

Although most members renew prior to expiration, the vast majority of those who renew late do so within six months of expiration.

The timing of

renewal after expiration is impacted by a variety of factors, such as warehouse openings and promotional activity.

Human Capital

“Take Care of Our Employees,” is a key component of our code of ethics and is fundamental to our commitment to “Take Care of Our Members.” We must also carefully control our selling, general and administrative (SG&A) expenses, so that we can sell high quality goods and services at low prices.

Compensation and benefits for employees is our largest expense after the cost of merchandise and is carefully monitored.

“Take Care of Our Employees,” is a key component of our code of ethics and is fundamental to our commitment to “Take Care of Our Members.” Compensation and benefits for employees is our largest expense after the cost of merchandise and is carefully monitored.

Employee Base

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Approximately 95% are employed in our membership warehouses and distribution channels.

Approximately 5% are represented by unions.

Around 5% are represented by unions.

We also utilize seasonal employees.

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a commitment to employee development and promoting from within;

and a target ratio of at least 50% of our employee base being full-time employees.

and a target ratio of at least 50% of our base being full-time employees.

These attributes contribute to what we consider, especially for the industry, a high retention rate.

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and Canada that rate was approximately 94% for employees who have been with us for at least one year.

Diversity, Equity and Inclusion

The commitment to “Take Care of Our Employees” includes promoting diversity, equity and inclusion and creating an inclusive and respectful workplace.

We strive for an environment where all employees feel that they belong, are accepted, included, respected and supported because of whom they are individually.

We demonstrate leadership commitment to equity through consistent communication, employee development and education, support of diversity and inclusion initiatives within the organization, community involvement, and supplier inclusion.

The commitment to “Take Care of Our Employees” includes promoting an inclusive and respectful workplace.

We strive for an environment where all employees feel that they belong, are accepted, included, respected and supported.

We demonstrate leadership commitment to inclusion through consistent communication, employee development and education, support of diversity and inclusion initiatives within the organization, community involvement, and supplier inclusion.

Listening to our employees is one of the ways Costco takes care of its workforce.

In 2025, we hosted the Costco Connects meetings, its second annual Costco Connects campaign.

These open listening sessions are an invitation for employees to talk about what is on their minds and what is impacting them both personally and professionally.

This allows Costco leaders to engage with their employees on a deeper level and for employees to build connections with each other.

This year we had approximately 200,000 employees participate globally.

Costco continues its efforts to develop future leaders, including through our supervisor in training (SIT) programs in the U.S.

In 2024, over 7,500 hourly employees completed the 6-week course.

Costco strives to provide our employees with competitive wages and excellent benefits.

In July 2024, we increased the starting wage to at least $19.50 for all entry-level positions in the U.S.

We also increased the top of wage scales by $1 per hour, and increased all other steps of the wage scales by $0.50 per hour, bringing our average hourly rate at the end of 2024 for hourly employees in the U.S.

In 2025, approximately 7,500 hourly employees completed the 6-week course.

We strive to provide our employees with competitive wages and excellent benefits.

In March 2025, we increased the starting wage by $0.50 an hour to at least $20.00 for all entry-level positions in the U.S.

We also increased the top of wage scales by $1.00 per hour, bringing our average hourly rate at the end of 2025 for hourly employees in the U.S.

to approximately $32.00 per hour.

We continue to offer expansive benefits in the U.S.

that provide physical, emotional and financial well-being support for employees and their dependents at little cost to our employees.

Costco remains committed to protecting the health and safety of our members and employees and to serving our communities.

We continue to offer

expansive benefits in the U.S.

that provide physical, emotional, mental, and financial well-being support for employees and their dependents at low cost to our employees.

For more detailed information regarding our programs and initiatives, see “Employees” within our Sustainability Commitment (located on our website).

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We also compete with other warehouse clubs, including Walmart’s Sam’s Club and BJ’s Wholesale Club in the U.S.

Many of the major metropolitan areas in the U.S.

Many of the metropolitan areas in the U.S.

and certain of our Other International locations have multiple competing clubs.

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from April 2019 to February 2024 and, prior to that, as Chief Executive Officer of Kroger Personal Finance since July 2010.

Galanti Executive Vice President.

Galanti has been a director since January 1995.

He was Chief Financial Officer from October 1993 to March 2024.

Galanti will be retiring from the Company effective January 2025.

Miller Senior Executive Vice President, U.S.

Russ Miller Senior Executive Vice President, U.S.

Miller was Executive Vice President, Chief Operating Officer, Southwest Division and Mexico, from January 2018 to May 2022.

Miller was Senior Vice President, Western Canada Region, from 2001 to January 2018.

Adamo Executive Vice President, Merchandising.

Miller will be retiring from the Company effective February 2026.

Claudine Adamo Executive Vice President, Merchandising.

Adamo was Senior Vice President, Non-Foods, from 2018 to February 2022, and Vice President, Non-Foods, from 2013 to 2018.

Callans Executive Vice President, Administration.

Patrick Callans Executive Vice President, Administration.

Callans was Senior Vice President, Human Resources and Risk Management, from 2013 to December 2018.

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Frates was Senior Vice President, Los Angeles Region, from 2015 to May 2022.

Frates will be appointed Senior Executive Vice President, Warehouse Operations - U.S.

and Mexico, effective February 2026.

Teresa Jones Executive Vice President, Global Depots and Traffic.

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Polit previously served as Chief Information Officer for Mondelez International (formerly Kraft Foods) from 2022 to 2024.

From 2017 to 2022, he was Chief Information Officer for Procter & Gamble Company.

From 2017 to 2022, he was Chief Information Officer for The Procter & Gamble Company.

Prior to that role, he served as Group Chief Information Officer for The Coca-Cola Company from 2007 to 2017.

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Riel was Senior Vice President, Country Manager, Canada, from 2019 to March 2022, and Senior Vice President, Eastern Canada Region, from 2001 to 2019.

Rubanenko Executive Vice President, Chief Operating Officer, Eastern Division.

Yoram Rubanenko Executive Vice President, Chief Operating Officer, Eastern Division.

Rubanenko was Senior Vice President and General Manager, Southeast Region, from 2013 to September 2021, and Vice President, Regional Operations Manager for the Northeast Region, from 1998 to 2013.

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Sullivan has been General Counsel since 2016 and Corporate Secretary since 2010.

Richard Wilcox Executive Vice President, Chief Operating Officer, Southwest Division.

Wilcox was Senior Vice President, General Manager - San Diego Region from 2016 to October 2025.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business