• by Sarah Mahoney  @mahoney_sarah, March 7, 2025

The membership giant is evolving its approach to retail media and personalization, focusing on deepening customer engagement rather than just generating ad revenue.

Costco’s latest earnings report highlights steady sales growth, but the real story may be its measured approach to retail media. Unlike competitors that position advertising as a standalone revenue stream, Costco sees it as a tool to enhance member value and drive long-term loyalty.

Revenues rose 9.1% in the second quarter, reaching $62.53 billion, up from $57.33 billion in the same period last year. In the U.S., comparable sales climbed 8.3%, even as consumers adjusted their grocery spending habits in response to inflation. Net income totaled $1.78 billion, slightly up from $1.74 billion last year, though it came in below Wall Street expectations.

On a recent earnings call, Costco executives offered new details on how they are expanding the company’s retail media efforts. The company’s first off-site retail media campaign launched in Q1, and similar campaigns are now in place with about 10 partners, with more in the pipeline.

Gary Millerchip, Costco’s executive vice president and CFO, positioned retail media not as an ancillary business, but as a way to enhance Costco’s core value proposition. “We want to build out a more personalized capability for our membership experience,” he said. “It will take some time and likely be a multiyear road map as we build those capabilities. It’s a different approach than you will hear from our peers.”

When asked whether Costco’s retail media revenue could grow to match the 4%-5% seen at competitors, Millerchip pushed back on the comparison. “I wouldn’t think of it as Costco coming out and declaring a new revenue stream with a new margin profile,” he said. “We’ll think of it as a way to generate that share of value so we can reinvest in members and continue to drive our overall loyalty, member engagement, and top-line sales.”

Costco is also making strides in personalized marketing. The company recently sent a multivendor promotional email to 40 million members, tailoring messaging based on shopping frequency and purchase patterns. “It’s the first step for us in moving away from a ‘one-size-fits-all’ approach,” Millerchip noted. “We’re adjusting messaging without changing how we go to market, making communication more relevant.”

While the earnings call didn’t address the issue, Costco’s reaffirmation of its diversity, equity, and inclusion (DEI) policies last month has sparked significant consumer response. A shareholder vote recently upheld DEI policies after a conservative activist investor group pushed for their removal. The move has led to heightened social media discussion, with DEI advocates urging consumers to shop at Costco while limiting spending at Amazon, Walmart, and Target.

Though Costco’s quarterly results cover the period through Feb. 16, the company also provided full-month sales data for February, showing an 8.8% rise in net sales to $19.81 billion. In the U.S., comparable sales climbed 8.6%, while store traffic rose 5.8%.

Traffic data from retail insights firm Placer.ai highlights Costco’s gains, and could be an early indication it will benefit from pro-DEI shoppers. During the last week of February—which included the Economic Blackout day on February 28—Costco saw a 6.7% increase in foot traffic compared to the same week in 2024. By contrast, Target’s traffic declined 4.7%, while Walmart saw a modest 0.6% dip.