Earnings Rewind: The Future of Retail and Tech (Dec 2025 Edition)

Earnings Rewind: The Future of Retail and Tech

Welcome back to Earnings Rewind, the series where you can catch up on the earnings reports you might have missed while catching up on Stranger Things(as I was). This week, we saw reports from the worlds of tech, athleisure, and essential retail that offered a glimpse into the future of the consumer and enterprise economy. I am diving into results from Adobe, Lululemon, Costco, and Casey’s General Stores. From AI monetization to pizza innovation(rhyming baby!), here’s what’s going on with these companies.

Casey’s General Stores (CASY)

Stock Performance & Sentiment: Casey’s stock was down 6% for the week despite an across the board beat and raised guidance in on the EBITDA side although it did tighten guidance on same store sales which might have spooked investors hoping for the company to hit the higher end.  The company continues to consistently execute in a challenging consumer environment, validating the company’s strategic initiatives but it might have been valuation that scared investors off a bit especially as we move past quarters where top-line growth was bolstered by acquisitions into some quarters that will return back to single digit growth.

Earnings vs. Estimates: Casey’s delivered a strong second quarter for fiscal 2026. The company reported diluted EPS of $5.53, a 14% increase year-over-year, which beat expectations. Total revenue came in at $4.51 billion, up 14.2% from the prior year. Net income also rose 14% to $206.3 million, and EBITDA climbed 17.5% to $410.1 million.

Key Takeaways:

• Pros: The inside business was a standout, with same-store sales up 3.3% and gross profit dollars growing 13.5%. The prepared food and dispensed beverage category shone brightly with a 4.8% comp increase, driven by whole pizza pies and hot sandwiches. Fuel performance was also resilient; same-store fuel gallons rose 0.8% with a healthy margin of 41.6 cents per gallon. The integration of the CEFCO acquisition is going well, contributing to the EBITDA lift.

• Cons: Operating expenses remain a watchpoint, increasing 16.7% and 4.5% on a same-store basis (excluding credit card fees). While partly due to wage investments and higher variable comp from strong performance, it’s a metric investors will monitor closely.

• Guidance: Confidence is high. Casey’s updated its fiscal 2026 outlook, now expecting EBITDA growth of 15% to 17%(up from 10-12%) and inside same-store sales growth of 3% to 4%(from 2-5%).

Consumer & Economy: Casey’s noted that while lower-income consumers are under pressure, they are maintaining their visit frequency. The company is seeing a value-seeking behavior where guests are discerning but willing to spend on quality prepared food, often trading up to premium items like specialty pizzas or multi-packs in the bakery, viewing them as a strong value proposition compared to QSR alternatives.

Q&A Highlights: Analysts focused on the operating expense increase and the competitive landscape. Management clarified that the 4.5% OpEx increase was largely due to wage rates and incentive compensation linked to strong performance, rather than inefficiency. On the product front, the company teased the potential of its chicken wings initiative, with menu refinements largely complete and broader rollout testing underway, aiming to create a new consumption occasion for guests.

Casey’s is a stock I’d love to own. It’s pricy at a 30x forward multiple and a 2.6% free cash flow yield but it’s a company that executes well and I’d be happy to add on a pullback that brings it closer to a 25x multiple.

Costco Wholesale (COST)

Stock Performance & Sentiment: Costco continues to be on the more dominant retailers and this earnings did nothing to change my mind about that. The stock was down 1% for the week and is down 10% in the past year but that’s mostly due to valuation rather than poor performances. Investors big this stock up into a 50x multiple which is pretty high for a slower grower like Costco and that valuation has come down since then to a more reasonable if still high 40x.

Earnings vs. Estimates: Costco reported Q1 fiscal 2026 net sales of $67.3 billion, an increase of 8.2% year-over-year and a slight beat over estimates. Net income was $2.0 billion, with diluted EPS of $4.50, up from $4.04 a year ago against a 4.27 estimate. This performance was driven by a 6.4% increase in comparable sales (adjusted for gas and FX) and a 14% jump in membership fee income.

Key Takeaways:

• Pros: E-commerce was a star performer, with digitally-enabled comparable sales surging 20.5%, led by gold, jewelry, and gift cards. The recent membership fee increase contributed to fee income growth, but organic growth remained strong at 7.3% excluding the hike and FX. Fresh food and bakery also posted strong high single-digit growth.

• Cons: The renewal rate dipped slightly to 92.2% in the U.S./Canada (down 10 bps). Management attributed this to a mix shift, as newer digital sign-ups tend to renew at lower rates than warehouse sign-ups initially.

• Store Guidance: Costco continues to target ~30 new warehouse openings per year. While Costco doesn’t provide full year guidance often, they do provide monthly sales updates that keep investors pretty up to date as to how things are going on a month by month basis.

Consumer & Economy: Costco described the consumer as consistent and value-oriented. Inflation was relatively consistent, with pockets of inflation in beef and coffee offset by deflation in produce and gas. The treasure hunt atmosphere remains alive and well, and people are certainly looking for value in their food offerings(as mentioned by Casey’s) as evidenced by the U.S. food court selling 358,000 whole pizzas on Halloween (up 31%) and 4.5 million pies in the three days before Thanksgiving.

AI Impact: AI is quietly powering efficiency at Costco. Management highlighted its use in pharmacy inventory systems, where AI now autonomously reorders stock, improving in-stocks to over 98%. Similar tools are being deployed for gas inventory management to optimize supply and pricing.

Q&A Highlights: A key topic was the membership renewal rate. CFO Gary Millerchip explained the slight dip is mathematical—younger, digital-native members renew at lower rates initially. However, early efforts to target these members with relevant communication are already showing promise in mitigating this dip. Analysts also probed the retail media opportunity, with management confirming they are in the early innings of building a personalized ad platform that prioritizes member value over pure profit extraction.

Lululemon Athletica (LULU)

Stock Performance & Sentiment: Lululemon stock had a solid week moving up 7.5% for the week as investors weighed a strong earnings beat against significant leadership news. The announcement that CEO Calvin McDonald will step down on January 31 added a layer of uncertainty to an otherwise solid international growth story although was seemingly received well by the market. That’s likely due to the fact that the stock is down 47.6% in the last year despite the post-earnings bump this week.

Earnings vs. Estimates: For Q3 fiscal 2025, Lululemon reported net revenue of $2.56 billion, a 7% increase, exceeding its own guidance and what the market expected. Diluted EPS was $2.59, beating expectations of 2.22 handily. The company also raised its full-year revenue guidance to a range of $10.96 billion to $11.05 billion from $10.85-$11.00 billion and a similar increase in Diluted EPS.

Key Takeaways:

• Pros: International growth continues to carry the day here. China Mainland revenue soared 46%, and the Rest of World segment grew 19%. The men’s business also outperformed, growing 8%, while women’s grew 6%. The company also bumped up their stock buyback program by another $1 billion although given the performance in the last year, the recent stock buybacks weren’t done at an opportune time.

• Cons: The Americas region remains a challenge, with revenue declining 2% (U.S. down 3%). This weakness in the core market is the primary driver behind the new action plan to revitalize the brand. The CEO transition introduces execution risk during this critical turnaround phase.

• Guidance: Q4 revenue is expected to be $3.5 billion to $3.59 billion or growth of 2-4% if you exclude the 53rd week from 2024.

Consumer & Economy: Management noted signs of trade-down behavior in the U.S., with consumers becoming more selective and responding to promotional activity. The company held market share in premium activewear but saw slight losses in the broader performance apparel category. There’s certainly a lot of competition in this space with brands like Alo and others coming from Lululemon’s market share.

Q&A Highlights: The call was dominated by the CEO transition and the U.S. turnaround strategy. Incoming co-CEOs Meghan Frank and Andre Maestrini will oversee a three-pillar plan: Product Creation (speeding up timelines to 12-14 months), Product Activation (new visual merchandising and store curation), and Enterprise Efficiency. Management expressed confidence that innovation in 2026—including new fabrics for training and updates to core franchises like Scuba and ABC—will re-accelerate domestic growth. Lululemon is becoming a more mature brand is now being priced like one with the 5-6% free cash flow yield seeming about right for a company that’s now growing in the low single digits.

Adobe (ADBE)

Stock Performance & Sentiment: Adobe shares were closely watched as the company delivered what CEO Shantanu Narayen called an inflection quarter. The focus was heavily on the validation of its AI strategy, with investors looking for proof that generative AI is translating into revenue. The stock was up 2.5% for the week but still down 23.5% in the last year.

Earnings vs. Estimates: Adobe reported record Q4 revenue of $6.19 billion, growing 10% year-over-year, about 1.3% above estimates. Non-GAAP EPS was $5.50, a 14% increase against an estimate of 5.40. For the full fiscal year 2025, revenue hit a record $23.77 billion. Despite the idea that Adobe will be swallowed up by AI, the business continues chugging along.

Key Takeaways:

• Pros: Firefly and AI adoption are accelerating. The company reported a 3x quarter-over-quarter increase in generative credit consumption. The Document Cloud (Acrobat) business remains a powerhouse with 15% growth.

• Cons: Some analysts might scrutinize the FY26 guidance for total Adobe ending ARR growth of roughly 10%, looking for faster acceleration given the AI hype although other analysts might be happy it’s not actually worse given the thesis that Adobe could be most impacted by AI which can easily create digital art in a matter of moments.

• News: Adobe announced its intent to acquire Semrush for ~$1.9 billion to bolster its marketing technology stack, specifically for SEO and generative engine optimization. This is a business that will add half a billion in revenue to Adobe’s top-line so it’s not a game changer but it’s nice to see them use their free cash flow to expand their business.

AI Impact: AI is central to Adobe’s future. The company highlighted Firefly Services and Firefly Foundry, which allow enterprises to train custom models on their own brand assets. This moves AI from a novelty to a core enterprise workflow tool, automating content production at scale.

Q&A Highlights: Questions centered on AI monetization. Management emphasized that they are seeing a multiplier effect where AI usage drives upgrades to higher-tier plans and the purchase of add-on credit packs. David Wadhwani noted that freemium AI offers have driven a 35% increase in monthly active users (MAU), widening the funnel for future conversion. The Semrush acquisition was positioned as a critical tool for marketers to manage brand visibility in a world dominated by LLMs and AI search.

There’s this idea I’ve read that Adobe is trading like it’s dying and I don’t think that’s true. While, yes the current free cash flow yield of around 7% is cheap, it’s not quite Meta in 2022 cheap as there’s real concerns about the viability of their business as the # of seats companies need to AI decreases. Their business model isn’t the most user friendly either with them tying people into contracts and charging them to cancel. Still, if this hits a 10% yield, I’d be in on the back of their stock buybacks alone and the likely ability of them to figure it out and make AI work for them and their users better than others can.

Hey, at least they’re not Figma which is almost back to its IPO price. Sucks for those that chased the post IPO pop as they got burned quite badly there.

Conclusion

This week’s earnings rewinds highlight a clear divergence. Costco and Casey’s are winning by mastering the basics—value, convenience, and operational efficiency—while slowly integrating AI to sharpen their edge. Adobe is successfully pivoting its massive ship toward a generative AI future, with early signs of monetization taking root although risks remain which means the stock will likely be pressured for a good bit longer. Meanwhile, Lululemon faces the classic retail challenge: balancing explosive international growth with the need to reinvent itself in a maturing home market, all while navigating a major leadership change, it’s cheap but is it cheap enough given the slowing growth at home.

For me, valuation is the key word around all 4 of these companies and they’re mostly too expensive for me to own at the moment. I’m especially interest in Casey’s if that sucker can dip back into the 400s.