Costco Wholesale Corp. (NASDAQ:COST)

Current Income Tax Expense

The current income tax expense demonstrates a consistent upward trend over the six-year period. Beginning at $911 million in 2019, it increases steadily each year, reaching $2,474 million by 2024. This represents a substantial growth, indicating either increasing taxable income or changes in tax rates and regulations impacting current tax liabilities.

Deferred Income Tax Expense

The deferred income tax expense exhibits more variability compared to the current tax expense. Starting at $150 million in 2019, it declines over the next three years to a negative value of -$57 million in 2022, before slightly rebounding to $33 million in 2023 and turning negative again at -$101 million in 2024. This fluctuation suggests changes in timing differences between accounting income and taxable income, potentially due to adjustments in deferred tax assets and liabilities or alterations in tax legislation affecting deferred tax recognition.

Provision for Income Taxes

The overall provision for income taxes, a combination of current and deferred components, shows a rising pattern from $1,061 million in 2019 to $2,373 million in 2024. Despite the volatility in the deferred tax expense, the cumulative tax provision maintains upward momentum, driven mainly by the increasing current tax expense. The growth in the tax provision is indicative of increasing pre-tax earnings or other tax-related factors resulting in higher tax obligations over time.

Statutory Tax Rate

The statutory tax rate remained constant at 21% throughout the entire period from 2019 to 2024, indicating no changes in the fundamental corporate tax legislation affecting the company.

State Taxes, Net

State taxes stayed relatively stable between 3% and 3.6% over the years, showing minor fluctuations. Notably, there was a slight dip in the latest year to 3%, the lowest in the period, which may suggest changes in state tax policies or company operations at the state level.

Foreign Taxes, Net

Foreign tax rates exhibit variability with a starting value unreported in 2019. They peaked at 3% in 2022 before declining to 1.1% by 2024. This pattern suggests fluctuating foreign tax exposure or changes in international operations and tax planning strategies over time.

Employee Stock Ownership Plan (ESOP)

The impact of ESOP on tax rate shows negative percentages throughout, varying from -0.3% to -1.3%. The effect fluctuated, becoming more negative in 2021 and again in 2024, indicating occasional increases in tax benefits or deductions related to employee stock ownership.

Other Items

The "Other" category shows a generally negative to slightly positive influence on the effective tax rate, with values ranging from -2.5% to 0.7%. There was a sharp decrease to -2.5% in 2022, followed by a rebound to 0.5% in 2024, signaling varying miscellaneous tax effects or adjustments in those years.

Effective Tax Rate, Before 2017 Tax Act

This rate remained relatively consistent around 24% to 25.9% across the years, with a subtle upward trend peaking in 2023. This consistency indicates stable underlying tax obligations before considering changes brought by the 2017 tax legislation.

2017 Tax Act Impact

The 2017 Tax Act impact was only recorded in 2019, showing a -2.6% effect. This one-time adjustment reflects the immediate impact of tax reform legislation and no subsequent direct adjustments in later years.

Effective Tax Rate

The overall effective tax rate followed a moderate upward trajectory from 22.3% in 2019 to a peak of 25.9% in 2023, before decreasing to 24.4% in 2024. This pattern aligns with variations in foreign taxes, ESOP, and other factors, indicating dynamic tax expense management within the stable statutory tax environment.

The analysis of the financial data over the six annual periods reveals several notable trends across various financial items.

Equity compensation

There is a general upward trend in equity compensation, increasing steadily from $74 million in 2019 to $96 million in 2024. This suggests a growing emphasis on equity-based incentives.

Deferred income/membership fees

This item exhibited fluctuation, initially declining from $180 million in 2019 to $144 million in 2020, then rising sharply to $302 million in 2022, and maintaining a plateau near $313 million by 2024. This pattern may reflect changes in membership fee recognition or customer activity.

Foreign tax credit carry forward

There is a consistent and substantial increase from $65 million in 2019 to $315 million in 2024, indicating expanding foreign tax credits possibly due to increased international operations or changes in tax strategy.

Operating lease liabilities

Starting from 2020 (data missing in 2019), operating lease liabilities have steadily declined from $832 million to $678 million by 2024, which may reflect lease terminations or renegotiations reducing leasing commitments.

Accrued liabilities and reserves

A clear upward trend is observed, increasing from $566 million in 2019 to $873 million in 2024. This points to growing obligations or provisions set aside over the years.

Other items

Data in this category is somewhat sporadic and limited. Notably, an item recorded $62 million in 2021 and fluctuated thereafter, suggesting variable miscellaneous items with no clear trend.

Deferred tax assets

Deferred tax assets have more than doubled, rising from $885 million in 2019 to $2.275 billion in 2024, which suggests an increasing recognition of future tax benefits.

Valuation allowance

The valuation allowance, a contra account to deferred tax assets, has increased steadily in magnitude (negative values moving from -$76 million to -$494 million), indicating growing uncertainty or risk regarding the realization of some deferred tax assets.

Net deferred tax assets

Net deferred tax assets, computed as deferred tax assets minus valuation allowance, remained relatively stable with minor fluctuations, from $809 million in 2019 to $1.781 billion in 2024. This stability suggests balanced recognition against associated risks.

Property and equipment

This category shows negative values throughout, indicating accumulated depreciation or net book value, fluctuating with no consistent trend between -$677 million and -$948 million. The variations suggest asset base maintenance or disposals over time.

Merchandise inventories

Merchandise inventories increased in negative value from -$187 million in 2019 to a peak of -$380 million in 2022 before recovering to -$296 million in 2024. The significant increase followed by partial reversal may relate to inventory management changes or seasonal stocking strategies.

Operating lease right-of-use assets

From 2020 onwards, these assets decreased steadily from -$801 million to -$652 million in 2024, consistent with the decline in lease liabilities, reflecting the amortization or reduction of leased assets.

Foreign branch deferreds

These liabilities have modestly increased on the negative side, from -$69 million to -$105 million, indicating a slight growth in deferred tax liabilities related to foreign operations.

Deferred tax liabilities

The deferred tax liabilities have nearly doubled in magnitude, moving from -$954 million to approximately -$2 billion by 2024, highlighting increased tax obligations deferred to future periods.

Net deferred tax assets (liabilities)

This figure fluctuates negatively from -$145 million to -$221 million over the six years, indicating that deferred tax liabilities somewhat outweigh deferred tax assets on a net basis.

Overall, the financial data reflect growth in equity compensation, deferred tax assets, and accrued liabilities, alongside a reduction in operating lease commitments and adjustments in inventory levels. The deferred tax components show expanding assets and liabilities, with increasing valuation allowances indicating cautious optimism towards realization of deferred tax benefits. The stability in net deferred tax assets and liabilities suggests balanced management of tax positions. The trends in property, equipment, and leases correspond to ongoing asset management and leasing strategy adjustments.

Deferred Income Tax Assets

Deferred income tax assets showed a consistent upward trend over the periods analyzed. Starting at 398 million US dollars in 2019, the value increased each year, reaching 548 million US dollars by 2024. This growth indicates an increasing recognition of future tax benefits, which could be attributed to timing differences in recognition of income or expenses between accounting and tax reporting.

Deferred Income Tax Liabilities

Deferred income tax liabilities exhibited a less consistent pattern compared to assets. The liabilities rose from 543 million US dollars in 2019 to a peak of 795 million US dollars in 2023. However, there was a noticeable decline to 769 million US dollars in 2024. The initial increase suggests growing future tax obligations, potentially due to timing differences that defer taxable income to future periods. The decline in the latest period could be indicative of changes in tax regulations, business operations, or adjustments in accounting estimates.

Comparative Observations

Throughout the six-year period, deferred tax liabilities consistently exceeded deferred tax assets, highlighting a net deferred tax liability position. The widening gap until 2023 reflects an increasing net deferred tax obligation, while the slight contraction in 2024 may suggest early signs of alignment or adjustments in tax timing differences. Both assets and liabilities demonstrate active management of tax-related accounting items, with assets growing steadily and liabilities showing more volatility.

The financial data reveals consistent growth in total assets over the analyzed periods, with both reported and adjusted figures demonstrating an upward trend. Reported total assets increased from 45,400 million USD in 2019 to 69,831 million USD in 2024, while adjusted total assets followed a similar trajectory, rising from 45,002 million USD to 69,283 million USD in the same timeframe. This steady growth indicates an expansion in the company's asset base.

Total liabilities also showed a continual increase over the years. Reported liabilities grew from 29,816 million USD in 2019 to 46,209 million USD in 2024, and adjusted liabilities rose correspondingly from 29,273 million USD to 45,440 million USD. Although liabilities increased, the pace appears somewhat moderate relative to the asset growth.

Regarding stockholders’ equity, the data depicts an overall positive trend with some fluctuations. Reported equity rose from 15,243 million USD in 2019 to a peak of 25,058 million USD in 2023, before slightly declining to 23,622 million USD in 2024. Adjusted equity mirrored this movement, increasing from 15,388 million USD in 2019 to 25,362 million USD in 2023, then decreasing marginally to 23,843 million USD in 2024. This suggests that equity growth has been strong but experienced a minor contraction in the latest year.

Net income attributable to the company demonstrated robust growth throughout the period. Reported net income rose from 3,659 million USD in 2019 consistently increased to 7,367 million USD in 2024, showing a more than doubling over five years. The adjusted net income trends closely align with the reported figures, advancing from 3,809 million USD to 7,266 million USD in the corresponding periods. This consistent increase underscores improving profitability.

Asset Growth

Both reported and adjusted total assets steadily increased by approximately 53% from 2019 to 2024.

Liabilities

Total liabilities also rose but at a slightly slower rate compared to assets, indicating potentially stable leverage levels.

Stockholders’ Equity

Equity showed strong upward momentum with a slight dip in 2024, which may indicate some changes in retained earnings or other equity components for that year.

Net Income

Net income more than doubled over the period, displaying significant earnings growth and operational success.

Reported vs. Adjusted Figures

The differences between reported and adjusted values are relatively minor, suggesting that deferred tax adjustments or related accounting treatments have a limited impact on the overall financial position and performance trends.

The analysis of the financial data over the six-year period reveals several noteworthy trends in profitability, efficiency, leverage, and returns.

Net Profit Margin

There is a general upward trend in both reported and adjusted net profit margins. The reported net profit margin increased from 2.45% in 2019 to 2.95% in 2024, while the adjusted net profit margin moved from 2.55% to 2.91% over the same period. This indicates a gradual improvement in profitability, with adjusted margins consistently slightly higher or close to the reported margins, reflecting minor impacts of tax and accounting adjustments.

Total Asset Turnover

Both reported and adjusted total asset turnover ratios exhibit improvement over time. Reported turnover declined initially from 3.29 in 2019 to 2.94 in 2020 but then increased steadily, reaching 3.57 by 2024. Adjusted turnover shows a similar pattern with slightly higher values throughout, ending at 3.6 in 2024. This suggests enhanced efficiency in asset utilization, particularly after the dip in 2020.

Financial Leverage

Financial leverage ratios demonstrate some fluctuation but a downward tendency toward the end of the period. Reported leverage peaked at 3.37 in 2021, then declined to 2.96 by 2024. Adjusted leverage follows a similar pattern, peaking at 3.29 in 2021 and decreasing to 2.91 in 2024. The reduction in leverage could indicate a strategic effort to lower financial risk or optimize capital structure.

Return on Equity (ROE)

ROE shows significant variability. Reported ROE declined from 24% in 2019 to 21.89% in 2020, surged to 28.51% in 2021, and then fluctuated before reaching a notable high of 31.19% in 2024. Adjusted ROE follows the same overall trend, with values slightly higher or very close to reported figures. The strong recovery and increase in ROE in recent years signal improved profitability relative to shareholder equity.

Return on Assets (ROA)

ROA values consistently rose throughout the period. Reported ROA moved from 8.06% in 2019 to 10.55% in 2024, with adjusted ROA closely mirroring this pattern. This steady increase demonstrates enhanced asset profitability and better overall operational performance.

In summary, the data indicates a positive progression in profitability and efficiency, supported by increasing margins, improving asset turnover, and rising returns. Despite some fluctuations in financial leverage and ROE, the company appears to have strengthened its financial position through more effective use of assets and equity. The alignment between reported and adjusted figures suggests that tax and deferred income adjustments have not significantly distorted the overarching financial trends observed.

Net income attributable to Costco

The reported net income consistently increased over the six-year period, rising from $3,659 million in 2019 to $7,367 million in 2024. This reflects a strong growth trend, with the most notable annual increases occurring between 2022 and 2023, and again from 2023 to 2024. The adjusted net income follows a similar upward trajectory, starting at $3,809 million in 2019 and reaching $7,266 million in 2024, though it slightly diverges from the reported figures, suggesting the impact of deferred income tax adjustments and other factors.

Net profit margin

The reported net profit margin remained relatively stable in the early years, hovering around 2.45% in 2019 and 2020 before gradually increasing to 2.95% in 2024. This indicates improved profitability relative to revenues over time. The adjusted net profit margin displayed a similar pattern, starting at 2.55% in 2019, slightly declining to 2.51% in 2020, and then increasing back to 2.91% by 2024. The close alignment of reported and adjusted margins throughout the period suggests consistent tax adjustments without significant distortions to profitability trends.

Overall trends and insights

The data demonstrates a clear growth in profitability both in absolute terms and on a margin basis, signalling effective operational performance and financial management. The upward trend in both reported and adjusted net income indicates that income tax adjustments have a moderate but consistent effect on the financial results. The steady improvement in net profit margins over the years points to enhanced efficiency or pricing power, contributing to higher returns despite the relatively modest margin percentages.

The data reveals an overall upward trend in both reported and adjusted total assets from September 2019 through September 2024. Reported total assets increased from $45,400 million in 2019 to $69,831 million in 2024, demonstrating consistent growth over the six-year period. Adjusted total assets exhibit a very similar pattern, rising from $45,002 million to $69,283 million during the same timeframe. The adjustments appear to have a relatively small impact, with adjusted assets slightly lower than reported assets each year but closely tracking the same upward trajectory.

In terms of asset turnover ratios, both reported and adjusted figures show fluctuations but generally indicate improvement or stabilization at higher levels after a dip. The reported total asset turnover ratio decreased from 3.29 in 2019 to 2.94 in 2020, which may suggest a decline in efficiency or changes in operations during that year. However, the ratio recovers in subsequent years, rising to 3.57 by 2024, which marks the highest turnover ratio in the period observed. The adjusted total asset turnover follows the same pattern: an initial drop from 3.32 in 2019 to 2.96 in 2020, followed by a steady upward trend ending at 3.6 in 2024.

The close alignment between reported and adjusted figures for both total assets and asset turnover ratios indicates that the adjustments made for deferred income tax have a limited influence on the overall financial metrics. The recovery and eventual improvement in total asset turnover suggest enhanced efficiency in asset utilization, particularly after 2020. This pattern could reflect operational improvements, better asset management, or growth strategies that resulted in more sales or revenues per dollar of assets held.

Key observations:

- Steady increase in both reported and adjusted total assets over the six-year period.

- Slightly lower adjusted assets relative to reported assets each year, with minimal difference between the two.

- Decline in total asset turnover ratios in 2020 followed by consistent recovery and improvement through 2024.

- Adjusted and reported ratios closely mirror each other, reinforcing the limited impact of deferred tax adjustments on turnover measures.

Overall, the data suggests a growing asset base coupled with improving asset efficiency after a short-term decline, reflecting positive operational trends.

Total Assets

The total assets showed a consistent upward trend over the period analyzed. Reported total assets increased from $45,400 million in 2019 to $69,831 million in 2024. Similarly, adjusted total assets also grew steadily from $45,002 million to $69,283 million during the same timeframe. This growth indicates an expansion in the asset base of the entity over six years, suggesting potential increases in operational scale or acquisitions.

Stockholders’ Equity

Reported stockholders’ equity experienced an overall increase from $15,243 million in 2019 to a peak of $25,058 million in 2023, followed by a slight decline to $23,622 million in 2024. Adjusted equity values mirror this trend, rising from $15,388 million to $25,362 million by 2023 and then decreasing to $23,843 million. This pattern suggests an improvement in equity financing and retained earnings until 2023, with a modest reduction in the most recent year, which may be attributed to dividend payments, share buybacks, or other equity-related transactions.

Financial Leverage

Financial leverage ratios displayed some volatility during the period. The reported financial leverage ratio increased from 2.98 in 2019 to a high of 3.37 in 2021, then declined to 2.75 in 2023, before rising again to 2.96 in 2024. The adjusted financial leverage ratio follows a comparable pattern, rising from 2.92 to 3.29 between 2019 and 2021, then decreasing to 2.70 in 2023 and slightly increasing to 2.91 in 2024. This fluctuation indicates varying degrees of reliance on debt versus equity financing over the years, with the peak leverage suggesting a period of higher debt relative to equity, followed by efforts to reduce leverage, and a slight uptick in the latest year.

The financial data over the recent six-year span reveals distinct trends in income, equity, and return on equity (ROE) for the company.

Net Income

Both reported and adjusted net income attributable to the company show a consistent upward trajectory across the periods analyzed. Reported net income increased steadily from $3.659 billion in 2019 to $7.367 billion in 2024. Adjusted net income follows a similar pattern, rising from $3.809 billion to $7.266 billion over the same timeframe. This indicates robust growth in profitability, with a slight difference between reported and adjusted figures suggesting the impact of deferred income tax adjustments is relatively modest but consistent.

Stockholders' Equity

Reported total stockholders’ equity experienced general growth from $15.243 billion in 2019 to a peak of $25.058 billion in 2023, before a decline to $23.622 billion in 2024. Adjusted total equity mirrors this trend, increasing from $15.388 billion in 2019 to $25.362 billion in 2023, then decreasing to $23.843 billion in 2024. The rise in equity over the first five years suggests accumulation of retained earnings and possibly other comprehensive income components, while the decline in the last period could indicate share repurchases, dividend payments, or other equity adjustments.

Return on Equity (ROE)

ROE figures demonstrate some fluctuations over the reported years. Reported ROE decreased slightly from 24.00% in 2019 reaching a low in 2020 at approximately 21.89%, then increased markedly to about 28.5% in 2021 and remained relatively stable through 2022. It then dipped again to 25.11% in 2023 before rising sharply to 31.19% in 2024. Adjusted ROE reflects a parallel trend, starting higher at 24.75% in 2019, dipping slightly in 2020, then rising to near 28.35% in 2021 and showing a moderate decline in 2023 before recovering to 30.47% in 2024. These patterns suggest improving profitability efficiency with some year-to-year volatility, potentially influenced by equity base changes and income adjustments.

Net Income Trends

Both reported and adjusted net income attributable to the company demonstrate a consistent upward trajectory over the six-year period. Reported net income increased from 3,659 million US dollars in 2019 to 7,367 million US dollars in 2024, more than doubling during this time frame. Adjusted net income follows a similar pattern, rising steadily from 3,809 million US dollars to 7,266 million US dollars. The close alignment of reported and adjusted figures suggests limited impact from deferred income tax adjustments on net income.

Total Assets Development

Total assets, both reported and adjusted, show a steady increase year-over-year. Reported total assets rose from 45,400 million US dollars in 2019 to 69,831 million US dollars in 2024. Adjusted total assets similarly climbed from 45,002 million to 69,283 million US dollars over the same period. The slight variance between reported and adjusted totals remains relatively stable, indicating consistent treatment of deferred tax adjustments in asset valuation.

Return on Assets (ROA) Analysis

Reported ROA exhibits fluctuation but an overall upward trend, starting at 8.06% in 2019, peaking at 10.55% in 2024. Adjusted ROA follows a similar pattern, ranging from 8.46% to 10.49%. Notably, both measures experience a dip in 2020 compared to 2019 but recover and continue to improve thereafter. The proximity of reported and adjusted ROA values suggests that deferred income tax adjustments do not materially affect this profitability measure.

General Observations

The data portrays a company experiencing consistent growth in profitability and asset base over the period. Income and asset metrics both nearly double from 2019 to 2024, while profitability as measured by ROA improves steadily. The minor differences between reported and adjusted figures indicate deferred income tax impacts are present but do not significantly alter financial performance measures. The recovery from the 2020 dip highlights resilience and operational strength.