Costco (COST) appears to have ended 2024 on a positive note with consumers as the warehouse club’s products and deals went viral on TikTok almost every week last year.
The increased momentum translated to Costco recently facing a significant boost in sales and profits. During the first quarter of fiscal year 2025, Costco’s total revenue increased by roughly 7% year-over-year, while its net sales spiked by about 7% compared to the same period last year.
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Even after the warehouse club began cracking down on membership card sharing in 2023 and raised its membership fees in September, it still managed to increase its membership numbers by almost 8% year-over-year during the quarter.
Related: Walmart, Lowe’s among retailers that caved to blowback in 2024
Now, it appears that the tables are starting to turn on Costco after it fiercely defended a controversial workplace policy that many other companies in corporate America are beginning to ditch.
Costco defends its DEI program, which is on the chopping block
Ahead of Costco’s Jan. 23 shareholder meeting, where investors are set to vote on a proposal to cut the warehouse club’s diversity, equity and inclusion program, Costco’s board of directors sent a notice to shareholders encouraging them to vote against it.
“Our efforts at diversity, equity and inclusion remind and reinforce with everyone at our company the importance of creating opportunities for all,” said Costco’s board of directors in the notice. “We believe that these efforts enhance our capacity to attract and retain employees who will help our business succeed.”
Costco’s board also claimed that DEI helps the company better serve its customers.
“As our membership diversifies, we believe that serving it with a diverse group of employees enhances satisfaction,” reads the notice. “Among other things, a diverse group of employees helps bring originality and creativity to our merchandise offerings, promoting the ‘treasure hunt’ that our customers value.”
The National Center for Public Policy Research introduced the proposal to cut Costco’s DEI program. The group expressed concerns that the program carries legal risks after the U.S. Supreme Court ended affirmative action in college admissions with its Students for Fair Admissions v. President and Fellows of Harvard decision in June 2023.
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“It’s clear that DEI holds litigation, reputational and financial risks to the company, and therefore financial risks,” said the National Center for Public Policy Research in its proposal. “And yet Costco still has such a program, though it was apprehensive enough to recognize this as it recently and quietly rebranded its DEI program to ‘People and Communities.’”
The National Center for Public Policy Research claims that Costco’s “rebranded” DEI program has a “commitment to equity.” The group also states that the program employs a chief diversity officer, contains a supplier diversity program that “picks suppliers based on their race and sex,” influences hiring and promotion choices and sends shareholder money to organizations that support DEI.
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“With 310,000 employees, Costco likely has at least 200,000 employees who are potentially victims of this type of illegal discrimination because they are white, Asian, male or straight,” said the group in its proposal.
In response to the group’s concerns, Costco’s board of directors argued in its notice that its DEI program is non-discriminatory.
“We believe that our diversity, equity and inclusion efforts are legally appropriate, and nothing in the proposal demonstrates otherwise,” said Costco’s board in the notice.
Consumers threaten to boycott Costco over DEI
Costco’s strict defense of its DEI policies has drawn boycott threats from some consumers who took to social media platform X to express outrage over the company’s beliefs.
Boycotting COSTCO for doubling down and keeping DEI.
canceled membership today— Candy Corn (@kenmcco02662121) January 2, 2025
Conservative activist Robby Starbuck, who has a large following on X and has successfully pushed many companies last year to axe their DEI programs, even encouraged his followers to boycott Costco.
Lots of people have asked me about @Costco doubling down on DEI. Let me explain the plan here… To be clear, I had nothing to do with the shareholder proposal that was made to get them to back away from DEI. We’ve had no talks with the company. Our projects still have a 100% flip… pic.twitter.com/WUdw3fnnwG
— Robby Starbuck (@robbystarbuck) December 30, 2024
Costco’s choice to defend DEI comes after many retailers such as Harley-Davidson, Tractor Supply, Lowe’s and Walmart quickly cut their DEI policies last year after facing boycott threats from consumers.
As the anti-woke movement gains steam, many companies now view DEI as a risk. According to an analysis from Bloomberg last year, more than two dozen public companies mentioned DEI as a risk factor in their securities filings.
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