Costco Wholesale Corp. (COST) - Q1 2026 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the 12-week fiscal quarter ended November 23, 2025 (Fiscal Q1 2026). Costco operates 921 membership warehouses globally, including 633 in the U.S. The company reported strong growth in net sales and membership fees, driven by comparable sales increases and new warehouse openings.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 | Change |
|---|---|---|---|
| Total Revenue | $67,307 million | $62,151 million | +8.3% |
| Net Sales | $65,978 million | $60,985 million | +8.2% |
| Membership Fees | $1,329 million | $1,166 million | +13.9% |
| Net Income | $2,001 million | $1,798 million | +11.3% |
| Diluted EPS | $4.50 | $4.04 | +11.4% |
| Operating Cash Flow | $4,688 million | $3,260 million | +43.8% |
| Cash & Equivalents | $16,217 million | $10,907 million | +48.7% |
| Long-Term Debt | $5,666 million | $5,713 million | -0.8% |
| Gross Margin % | 11.32% | 11.28% | +4 bps |
Material Changes vs. Prior Period
- Sales Growth: Net sales increased 8% year-over-year, driven by a 6% increase in comparable sales (attributed to a 3% rise in shopping frequency and average ticket) and sales from 25 net new warehouses opened since Q1 2025.
- Membership Revenue: Membership fees rose 14% to $1.329 billion, fueled by fee increases implemented in September 2024 and new member sign-ups. Total paid members reached 81.4 million.
- Margin Dynamics: Gross margin percentage increased 4 basis points. This was positively impacted by warehouse ancillary businesses (pharmacy, hearing aids) but negatively impacted by a smaller LIFO benefit compared to the prior year.
- Expense Management: SG&A expenses as a percentage of net sales increased slightly by 1 basis point. This was influenced by a tax assessment charge for prior years and higher preopening costs, partially offset by favorable impacts from central operating costs and stock compensation.
- Capital Allocation: The company repurchased 225,000 shares for $210 million and paid a quarterly dividend of $1.30 per share (up from $1.16 in Q1 2025).
Guidance, Outlook, and Risks
- Capital Expenditures: Management intends to spend approximately $6.5 billion on capital expenditures for fiscal 2026. This includes plans to open 25 additional new warehouses (including four relocations) in the remainder of the fiscal year.
- Liquidity: The company maintains strong liquidity with $17.2 billion in cash and short-term investments. Borrowing capacity under credit facilities stands at $1.32 billion.
- Risks and Contingencies:
- Legal Proceedings: Ongoing litigation includes class actions regarding wage and hour violations (California), opioid abuse impacts (multidistrict litigation), and privacy law violations related to pixel trackers on Costco.com. Management does not believe these will have a material adverse effect on financial position.
- Market Risks: Exposure to foreign currency fluctuations, inflation, and geopolitical conditions (including tariffs) remains a key risk factor.
Investor Verification Checklist
- Membership Renewal Rates: Verify the sustainability of the 92.2% U.S./Canada renewal rate and 89.7% worldwide rate, noting the negative impact of digital-only memberships.
- LIFO Impact: Monitor the trend of the LIFO benefit, as a reduction in this benefit negatively impacted gross margins in Q1 2026.
- Capital Spending Execution: Track progress against the $6.5 billion capital expenditure plan and the timeline for the 25 planned warehouse openings.
- Legal Exposure: Review developments in the privacy tracker litigation and opioid MDL cases for potential future accruals.
- Gasoline Price Sensitivity: Assess the impact of gasoline price deflation on net sales and gross margin percentages, as noted in the MD&A.