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Is Kirkland's Global Penetration Powering Costco's Margin Story?
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Key Takeaways
Kirkland sales grew faster than Costco overall in Q3 2025, lifting brand penetration by 50 bps.
Local sourcing in regions like Asia cut costs, slashed prices by 40% and boosted margin resilience.
COST stock rose 12.1% over the past year, with EPS and sales growth estimates of 11.5% and 8.1%.
Kirkland Signature’s growing global footprint is gradually becoming one of Costco Wholesale Corporation’s (COST - Free Report) most strategic margin levers. In the third quarter of fiscal 2025, Kirkland sales outpaced overall sales growth, lifting brand penetration by 50 basis points year over year. Behind this outperformance is a global sourcing strategy that aligns production closer to end markets.
By manufacturing or procuring Kirkland Signature items within the countries or regions where they are sold, Costco significantly reduces transportation costs and mitigates the impact of tariffs. A prime example cited is Kirkland Signature Ultra Clean Laundry products, now sourced in Asia for APAC warehouses, leading to a remarkable 40% reduction in member prices in that region. While the immediate goal is to pass savings to members, this localized sourcing strategy inherently improves the underlying cost structure.
This operational efficiency provides Costco with flexibility. It allows the retailer to maintain its competitive price position, even lowering prices on key items like butter and eggs while simultaneously returning margins to more normal levels. Thus, Kirkland's expanding global footprint and localized production are quietly powering a more resilient and efficient margin story for Costco, enabling value delivery amid a dynamic economic landscape.
With more than 40 new Kirkland items launched in the third quarter and a firm focus on global sourcing efficiency, Kirkland Signature has become a margin engine.
Costco’s Price Performance, Valuation and Estimates
Costco, which competes with Dollar General Corporation (DG - Free Report) and Target Corporation (TGT - Free Report) , has been a standout performer, with shares rallying 12.1% in the past year, outpacing the industry’s growth of 5.5%. Shares of Dollar General and Target have declined 12.3% and 30%, respectively, in the aforementioned period.
Image Source: Zacks Investment Research
From a valuation standpoint, Costco's forward 12-month price-to-earnings ratio stands at 50.35, higher than the industry’s ratio of 32.58. COST carries a Value Score of D. Costco is trading at a premium to Target (with a forward 12-month P/E ratio of 13.33) and Dollar General (18.94).
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Costco’s current financial-year sales and earnings per share implies year-over-year growth of 8.1% and 11.5%, respectively.
Image: Bigstock
Is Kirkland's Global Penetration Powering Costco's Margin Story?
Key Takeaways
Kirkland Signature’s growing global footprint is gradually becoming one of Costco Wholesale Corporation’s (COST - Free Report) most strategic margin levers. In the third quarter of fiscal 2025, Kirkland sales outpaced overall sales growth, lifting brand penetration by 50 basis points year over year. Behind this outperformance is a global sourcing strategy that aligns production closer to end markets.
By manufacturing or procuring Kirkland Signature items within the countries or regions where they are sold, Costco significantly reduces transportation costs and mitigates the impact of tariffs. A prime example cited is Kirkland Signature Ultra Clean Laundry products, now sourced in Asia for APAC warehouses, leading to a remarkable 40% reduction in member prices in that region. While the immediate goal is to pass savings to members, this localized sourcing strategy inherently improves the underlying cost structure.
This operational efficiency provides Costco with flexibility. It allows the retailer to maintain its competitive price position, even lowering prices on key items like butter and eggs while simultaneously returning margins to more normal levels. Thus, Kirkland's expanding global footprint and localized production are quietly powering a more resilient and efficient margin story for Costco, enabling value delivery amid a dynamic economic landscape.
With more than 40 new Kirkland items launched in the third quarter and a firm focus on global sourcing efficiency, Kirkland Signature has become a margin engine.
Costco’s Price Performance, Valuation and Estimates
Costco, which competes with Dollar General Corporation (DG - Free Report) and Target Corporation (TGT - Free Report) , has been a standout performer, with shares rallying 12.1% in the past year, outpacing the industry’s growth of 5.5%. Shares of Dollar General and Target have declined 12.3% and 30%, respectively, in the aforementioned period.
Image Source: Zacks Investment Research
From a valuation standpoint, Costco's forward 12-month price-to-earnings ratio stands at 50.35, higher than the industry’s ratio of 32.58. COST carries a Value Score of D. Costco is trading at a premium to Target (with a forward 12-month P/E ratio of 13.33) and Dollar General (18.94).
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Costco’s current financial-year sales and earnings per share implies year-over-year growth of 8.1% and 11.5%, respectively.
Image Source: Zacks Investment Research
Costco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.