Costco Wholesale Corp Earnings - Q4 2026 Analysis & Highlights
Costco Wholesale Corp reported strong fiscal year 2026 results driven by robust comparable sales growth, record membership penetration, and successful expansion of ancillary businesses, while management emphasized value delivery to members amid tariff refunds and navigating evolving macroeconomic conditions.
Key Financial Results
Net income for Q4 2026 reached $2.998 billion or $6.75 per diluted share, with a nonrecurring benefit of $0.15 per diluted share from IEEPA tariff refunds; excluding this benefit, net income and EPS were up 12.3% and 12.4% respectively from $2.61 billion or $5.87 per diluted share in the prior year.
Net sales for Q4 2026 were $93.87 billion, an increase of 11.2% from $84.43 billion in Q4 2025, with comparable sales up 9.4% and 6.7% adjusted for gas price inflation and foreign exchange.
Digitally enabled comparable sales were up 19.5%, and 19.8% adjusted for FX, with digitally enabled sales exceeding $33 billion and increasing more than 20% for the full year.
Traffic or shopping frequency increased 3.3% worldwide, while average transaction or ticket was up 5.9% worldwide and 3.3% excluding gas price inflation and changes in FX.
Membership fee income was $1.849 billion, an increase of $125 million or 7.3% year-over-year, with 7.7% growth adjusting for FX.
Gross margin rate was 11.02%, lower by 11 basis points year-over-year, but excluding gas inflation was higher by 20 basis points; core on core margins were higher by 18 basis points excluding tariff refund impacts.
SG&A rate was 8.94%, lower or better by 27 basis points year-over-year, compared to 9.21% in the prior year.
LIFO negatively impacted the gross margin rate by 11 basis points, with a $152 million LIFO charge in Q4 2026 compared to $43 million in Q4 2025, driven by higher memory costs in consumer electronics and inflation on items affected by the Middle East conflict.
Tariff refunds of $184 million were received in Q4, consisting of $174 million in refunds and $10 million in interest, representing slightly more than one-third of total refunds expected.
Business Segment Results
Non-foods comparable sales were up mid-to-high single-digits, with top-performing departments including gold and jewelry, home furnishings, housewares, small electrics, and health and beauty.
Fresh comparable sales were up mid-single digits, led by bakery and meat, with bakery reflecting success in adding new and indulgent items and in-house pastries growing over 100% in the quarter.
Food and sundries comparable sales grew low- to mid-single digits, led by packaged foods, sundries, and frozen foods, with members shifting toward healthier packaged foods and protein items.
Ancillary businesses' comparable sales were up high-20s during the quarter, with gas, pharmacy, and travel leading the way and all growing at a faster pace than overall growth rate.
Gas comparable sales were positive mid-30s, driven by price per gallon increase year-over-year and record gas volumes, with penetration of US member households purchasing gas reaching an all-time high.
Pharmacy sales grew nearly 20% as the company expanded digital capabilities, with GLP-1 and fertility programs and digital options like RX mobile pay ahead and pick-up lockers driving double-digit script growth.
Costco Travel sent over 750,000 members on cruises, an increase of 16%, with vacation packages, cruises, and car rentals all growing double digits during the year.
Capital Allocation
Capital expenditure was $2.21 billion in Q4 and $6.4 billion for the full fiscal year 2026.
For fiscal year 2027, approximately $7.5 billion in capital expenditure is planned, with the increase predominantly due to growth in the pipeline of new warehouses targeting a run rate of 30 net new openings per year and continuation of outside spend on supply chain.
Beyond fiscal year 2027, capital expenditure growth is expected to slow following three years of outsized growth that began in fiscal year 2025.
Membership and Customer Engagement
Executive member penetration reached an all-time high in fiscal year 2026, with 42.3 million paid Executive members, up 9.4% versus last year.
Total paid members reached 84.1 million, up 3.8% versus last year, and cardholders reached 150.4 million, up 3.6% year-over-year.
US and Canada renewal rate was 92.3%, up 10 basis points from last quarter, and worldwide rate was 89.8%, also up 10 basis points.
Member base under 40 has grown nearly 60% since COVID, increasing total penetration of members under 40 to more than a quarter of total base.
New member signups grew during fiscal year 2026 while cycling strong growth from fiscal year 2025 and without major outsized new openings in Asia.
Warehouse Expansion and Growth
In Q4 2026, Costco opened 12 warehouses, including a relocation in Taiwan, 10 new US buildings, and the 43rd warehouse in Mexico.
For fiscal year 2026, 28 new warehouses were opened, including three relocations, for a total of 25 net new buildings, bringing warehouse count to 939 worldwide.
For fiscal year 2027, the company plans to open 33 warehouses, of which five are relocations, as it builds toward the goal of opening 30 net new warehouses per year.
For fiscal year 2027, the company is planning to open four buildings in Europe, five in Canada, and one in Mexico, with a strong pipeline of new warehouses planned for Asia, Australia, and other international markets in fiscal year 2028.
Significant opportunities for new warehouse growth exist, including new US markets such as Buffalo, New York, and Lawrence, Kansas, infills in mature US markets, and international markets.
Industry Trends and Dynamics
Overall inflation during Q4 remained in the low single-digits, with non-foods inflation increasing predominantly due to memory costs in consumer electronics and gas- and petroleum-based items.
Inflation in food and sundries and fresh was largely consistent with prior quarters, with inflation in meat offset by deflation in eggs and dairy.
Members continue to show resilience in their spending and willingness to spend in discretionary areas where they see exciting new items at great value.
Members are responding to quality and value items, with strong growth observed in both value-oriented categories and premium items like jewelry and travel.
Supply chain is flowing relatively smoothly despite minor shipping disruptions due to typhoons in Asia and Panama Canal delays, with merchants feeling good about inventory position.
Freight costs are being closely monitored due to higher fuel prices, with incremental fuel surcharges largely offset by lower contracted shipping rates.
Competitive Landscape
Costco's agile, item-driven model allows buyers to stay ahead of member trends and quickly adjust assortment to offer high-quality, relevant products at the lowest prices.
The company's curated assortment with personally vetted items provides quality advantages that should show up strongly in member reviews and searches.
Costco's pricing authority and commitment to value positions the company to show up with best value for items sold, particularly in AI search environments.
The company does not engage in paid digital advertising, appearing more because of reputation and member social media discussions.
Macroeconomic Environment
Tariff refunds totaling $184 million were received in Q4 2026, with the company reinvesting majority of dollars received in increased member values through price reductions on everyday items, produce, meat, beverages, and non-food items.
Uncertainty exists around the Middle East situation and its potential impact on oil and oil-related item prices.
Uncertainty remains around tariffs that exist today or could exist in the future.
Members saved over $3.2 billion versus average pump prices in markets where Costco operates during fiscal year 2026.
Prices have been relatively stable, with the company's focus on finding ways to lower costs and efficiencies to offset commodity price inflation.
Growth Opportunities and Strategies
Digital expansion through third-party delivery partnerships is growing, with Uber Eats partnership expanding from 17 states to entire US and DoorDash partnership expanding to include the US, complementing the long-term Instacart partnership.
Members using new marketplace platforms are significantly younger than overall member base, with average delivery times across all three platforms under an hour.
Sales through third-party delivery channels are mostly incremental, with limited impact on core warehouse grocery business.
Personalization initiatives are accelerating, with enhanced product placements and email communications leading to triple-digit growth in sales from personalized initiatives in Q4, and 10% of all costco.com orders now including a personalized item.
AI search is growing in influence on how members search for products, with traffic to site from AI search growing triple-digits for second consecutive quarter and showing highest conversion rate of all site traffic.
Kirkland Signature brand continues to broaden, offering savings of at least 15% to 20% compared to national brand equivalents with equal or better quality.
Healthcare programs are expanding, with new partnership with SCAN Health Systems to develop Medicare Advantage benefits announced in Q4.
GLP-1 and fertility programs are increasing member value and convenience through digital options like RX mobile pay ahead and pick-up lockers.
The company is discontinuing extended marketplace offering Costco Next, integrating most popular items and brands more seamlessly into Costco app and website for better member experience.
Financial Guidance and Outlook
For fiscal year 2027, the company expects to continue receiving tariff refunds similar to Q4 amounts, with intention to reinvest majority of dollars in increased member values.
Tariff refunds and reinvestments will continue to impact fiscal year 2027 financial results as nonrecurring items, with similar level of information provided on future quarterly earnings calls.
Membership growth rate in recent quarters is expected to be typical of what the company would expect to see based on current growth in new members and normalization of renewal rate.
Sustained growth in top line sales is expected to come from balance between continued membership base growth and continued growth in member spending.
Executive membership penetration growth is expected to be a tailwind for renewal rate and potential accelerator to total membership growth over time.
Entry into Asian markets with outsized growth in new membership could be a catalyst for higher headline membership growth.
The company believes its commitment to taking care of members and delivering highly relevant products and services at lowest price presents opportunities to continue growing top line sales and market share in fiscal year 2027.
