Costco’s Q2 Earnings Preview Suggests Strong Growth. Some Say It’s Due to the Company’s DEI Policy

Costco will be announcing its Q2 earnings on March 6. An early preview of these earnings suggests that the company has been experiencing strong growth, and some credit the company’s DEI (diversity, equity, and inclusion) policy that flies in the face of Donald Trump’s recent executive orders. Let’s look at what we know.

Costco Q2 Earnings Preview: Strong Growth, Possibly Good Stock Buy

According to Seeking Alpha, one of Costco’s most significant assets is its members’ faith in the organization. Its revenues derive from membership fees, which provide a consistent and stable up-front income stream that Costco mostly reinvests to construct new warehouses without incurring debt.

The warehouse giant is a very conservatively run corporation with almost no debt and a large cash balance on its books. This business model also helped Costco avoid the problem of stealing. It is also a business where employees are satisfied with their jobs, customers believe they are getting excellent bargains, and shareholders see a company creating billions in free cash flow (FCF), which is subsequently given to them through regular dividends.

According to the current expectation, the company’s Q2 earnings (anticipated on March 6) will be quite favorable, with sales growth of roughly 8% and EPS increase of more than 10% year-over-year. Analysts predict declared revenues of $63 billion and earnings per share of $4.08. However, all eyes will be on the retention rate now that the membership cost increase has been implemented. If it remains above 92%, the few bears on Costco will most likely become invisible, while bulls may be encouraged.

MAGA Boycott, But They Didn’t Care

Part of the reason investors are so bullish about the company is its uptick in membership following the threatened MAGA boycott. Donald Trump supporters were furious that the company refused to roll back its DEI policies following President Trump’s executive orders all but barring the practices.

Despite some retail executives suggesting that DEI was bad for the company, investors and shareholders clarified that Costco’s core strength lies in its celebration of diverse cultures and ethnicities.

DEI initiatives were never intended to exclude qualified individuals from any group, but rather ensure that opportunities are awarded based on merit rather than historical biases. Their goal is to prevent unqualified candidates — regardless of background — from taking positions over equally or more qualified individuals. While concerns about reverse discrimination exist, studies, including one from Upstate Medical University, show that white women have been among the biggest beneficiaries of DEI policies.”

Costco has synthesized these realities of DEI and incorporated them into its own company practices. In a near-unanimous decision, the company refused to give in to pressures from reactionary conservative groups, and the decision paid off.

Shortly after its decision, Costco announced that it would increase its hourly pay rate for its employees to over $30 per hour.

The hike will begin with a $1 raise in the first year, increasing the rate to $30.20, followed by an extra $1 per year for the next two years, according to a corporate memo. Employees at the bottom of the pay range will get a compensation increase of 50 cents to $20. “With these changes, we believe our hourly wages and benefits will continue to far outpace others in the retail industry,” the company stated in a memo signed by CEO Ron Vachris.

This pay increase followed a recent vote by Costco Teamsters union members in favor of a nationwide strike as they entered the last stages of contract negotiations before the Jan. 31 deadline. However, the strike was averted, at least for now, according to CNN, though full terms of the agreement were not available at the time.