Costco Wholesale Corp /new,
Fiscal Year 2025 Q1.

Cash Flows from Operating Activities Net cash provided by operating activities totaled $3,260 in the first quarter of 2025, compared to $4,651 in the first quarter of 2024. The decrease in net cash provided by operating activities was due to an increase in our net investment in merchandise inventories. Our cash flow provided by operations is primarily from net sales and membership fees. Cash flow used in operations generally consists of payments to merchandise suppliers, warehouse operating costs, including wages and employee benefits, utilities, credit and debit card processing fees, and operating leases. Cash used in operations also includes payments for income taxes. Changes in our net investment in merchandise inventories (the difference between merchandise inventories and accounts payable) is impacted by several factors, including inventory levels and turnover, payment terms with suppliers, early payments to obtain discounts, and the shift in timing of the seasonal holiday to the second quarter of 2025.

Dividends A quarterly cash dividend of $1.16 per share was declared on October 16, 2024, and paid on November 15, 2024. Share Repurchase Program On January 19, 2023, the Board of Directors authorized a share repurchase program in the amount of $4,000, which expires in January 2027. During the first quarter of 2025 and 2024, we repurchased 230,000 and 288,000 shares of common stock, at an average price per share of $899.23 and $564.06, totaling approximately $206 and $162. These amounts may differ from the accompanying condensed consolidated statements of cash flows due to changes in unsettled repurchases at the end of a quarter. Purchases are made from time to time, as conditions warrant, in the open market or in block purchases, pursuant to plans under SEC Rule 10b5-1. Repurchased shares are retired, in accordance with the Washington Business Corporation Act. The remaining amount available to be purchased under our approved plan was $2,659 at the end of the first quarter.

Membership Fees 202420232022 Membership fees$4,828$4,580$4,224 Membership fees increase5 %8 %9 % Membership fee revenue increased 5% in 2024, driven by new member sign-ups and upgrades to Executive Membership. These increases were partially offset by one less week of membership fee income in 2024. At the end of 2024, our member renewal rates were 92.9% in the U.S. and Canada and 90.5% worldwide. Renewal rates benefited from higher penetration of Executive members. 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. Effective September 1, 2024, we increased our membership fees in the U.S. and Canada for Gold Star (individual), 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. We account for membership fee revenue on a deferred basis, recognized ratably over one year. We expect these fee changes to increase revenues approximately $370 over the next two years, $190 of which will benefit fiscal 2025, primarily in the latter half of the year.

Gross Margin 202420232022 Net sales$249,625$237,710$222,730 Less merchandise costs222,358212,586199,382 Gross margin$27,267$25,124$23,348 Gross margin percentage10.92 %10.57 %10.48 % Gross margin percentage increased 35 basis points. Excluding the impact of gasoline price deflation on net sales, gross margin percentage was 10.88%, an increase of 31 basis points. This increase was positively impacted by: 19 basis points due to warehouse ancillary and other businesses, primarily e-commerce and gasoline; 16 basis points due to the absence of charges related to the discontinuation of our charter shipping activities that were recorded in the first and third quarters of 2023; and three basis points due to a LIFO benefit. This increase was partially offset by four basis points in our core merchandise categories and three basis points due to increased 2% rewards. The gross margin in core merchandise categories, when expressed as a percentage of core merchandise sales (rather than total net sales), increased 11 basis points. The increase was primarily due to non-foods, partially offset by fresh foods and foods and sundries. This measure eliminates the impact of changes in sales penetration and gross margins from our warehouse ancillary and other businesses. Gross margin on a segment basis, when expressed as a percentage of the segment's own sales and excluding the impact of changes in gasoline prices on net sales (segment gross margin percentage), increased in our U.S. and Canadian segments. Our U.S. segment performed similarly to the consolidated results above. Our Canadian segment gross margin percentage increased, primarily due to increases in core merchandise categories and warehouse ancillary and other businesses, partially offset by increased 2% rewards. Gross margin percentage decreased in our Other International segment, primarily due to increased 2% rewards and a decrease in core merchandise categories. 26

Cash Flows from Financing Activities Net cash used in financing activities totaled $10,764 in 2024, compared to $2,614 in 2023. Cash flow used in financing activities primarily related to the payment of dividends, repayments of long-term debt and short-term borrowings, repurchases of common stock, and withholding taxes on stock-based awards. On May 18, 2024, we paid the $1,000 outstanding principal balance on the 2.750% Senior Notes, using cash and cash equivalents and short-term investments. Cash flow provided by financing activities included proceeds from short-term borrowings and four Guaranteed Senior Notes totaling approximately $500, at fixed interest rates ranging from 1.400% to 2.120%, issued by our Japan subsidiary.

Comparable Sales Comparable sales increased 5% in the first quarter of 2025 and were positively impacted by increased shopping frequency and a slightly higher average ticket. 19

Net cash provided by operating activities$3,260 $4,651 Net cash used in investing activities(985)(366) Net cash used in financing activities(1,193)(974) Our primary sources of liquidity are cash flows from operations, cash and cash equivalents, and short-term investments. Cash and cash equivalents and short-term investments were $11,827 and $11,144 at November 24, 2024, and September 1, 2024. Of these balances, unsettled credit and debit card receivables represented approximately $2,789 and $2,519 at November 24, 2024, and September 1, 2024. These receivables generally settle within four days. Material contractual obligations arising in the normal course of business primarily consist of purchase obligations, long-term debt and related interest payments, leases, and construction and land purchase obligations. Purchase obligations consist of contracts primarily related to merchandise, equipment, and third-party services, the majority of which are due in the next 12 months. Construction and land-purchase obligations consist of contracts primarily related to the development and opening of new and relocated warehouses, the majority of which (other than leases) are due in the next 12 months. We believe that our cash and investment position and operating cash flow, with capacity under existing and available credit agreements, will be sufficient to meet our liquidity and capital requirements for the foreseeable future and our U.S. current and projected asset position is sufficient to meet our U.S. liquidity requirements.

Cash Flows from Investing Activities Net cash used in investing activities totaled $985 in the first quarter of 2025, compared to $366 in the first quarter of 2024, and is primarily related to capital expenditures. Net cash from investing activities also includes purchases and maturities of short-term investments.

Capital Expenditure Plans Our primary requirements for capital are acquiring land, buildings, and equipment for new and remodeled warehouses, information systems and manufacturing and distribution facilities. In the first quarter of 2025, we spent $1,264 on capital expenditures, and it is our current intention to spend a total of approximately $5,000 during fiscal 2025. These expenditures are expected to be financed with cash from operations, cash and cash equivalents, and short-term investments. We opened seven new warehouses, including one relocation, in the first quarter of 2025 and plan to open 22 additional new warehouses, including two 22 relocations, in the remainder of fiscal 2025. There can be no assurance that current expectations will be realized, and plans are subject to change upon further review of our capital expenditure needs and the economic environment.

Bank Credit Facilities and Commercial Paper Programs We maintain bank credit facilities for working capital and general corporate purposes. At November 24, 2024, we had borrowing capacity under these facilities of $1,184. Our international operations maintain $689 of this capacity under bank credit facilities, of which $159 is guaranteed by the Company. Short-term borrowings outstanding under the bank credit facilities, which are included in other current liabilities on the consolidated balance sheets, were immaterial at the end of the first quarter of 2025 and at the end of fiscal 2024. We have letter of credit facilities, for commercial and standby letters of credit, totaling $222. The outstanding commitments under these facilities at the end of the first quarter of 2025 totaled $202, most of which were standby letters of credit that do not expire or have expiration dates within one year. The bank credit facilities have various expiration dates, most within one year, and we generally intend to renew these facilities. The amount of borrowings available at any time under our bank credit facilities is reduced by the amount of standby and commercial letters of credit outstanding.

Recent Accounting Pronouncements See discussion of Recent Accounting Pronouncements in Note 1 to the condensed consolidated financial statements included in Part I, Item 1 of this Report.

E-commerce13 %6 % Increases in comparable sales excluding the impact of changes in foreign-currency and gasoline prices(1): U.S.7 %3 % Canada7 %8 %