Costco Wholesale Corp. 10-Q Summary: Q2 Fiscal 2026
Business Context and Reporting Period
This filing covers the 12-week period ended February 15, 2026 (Q2 Fiscal 2026), and the 24-week period ended February 15, 2026 (First Half Fiscal 2026). Costco operates 924 membership warehouses globally, including 634 in the U.S. The company reported strong growth driven by comparable sales increases and new warehouse openings.
Key Financial Metrics
| Metric (in millions) | Q2 2026 | Q2 2025 | YTD 2026 | YTD 2025 |
|---|---|---|---|---|
| Total Revenue | $69,597 | $63,723 | $136,904 | $125,874 |
| Net Sales | $68,242 | $62,530 | $134,220 | $123,515 |
| Membership Fees | $1,355 | $1,193 | $2,684 | $2,359 |
| Operating Income | $2,606 | $2,316 | $5,069 | $4,512 |
| Net Income | $2,035 | $1,788 | $4,036 | $3,586 |
| Diluted EPS | $4.58 | $4.02 | $9.08 | $8.06 |
| Operating Cash Flow (YTD) | $7,684 | $6,008 | - | - |
| Cash & Equivalents | $17,383 | $14,161 | - | - |
| Long-Term Debt | $5,688 | $5,713 | - | - |
Margins (Q2 2026): Gross margin percentage was 11.02% (up 17 basis points). SG&A expenses were 9.19% of net sales (up 13 basis points). The effective tax rate was 25.2%.
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 9% in Q2 and 9% YTD, driven by a 7% increase in comparable sales and sales from 27 net new warehouses opened since Q2 2025.
- Comparable Sales Drivers: Growth was fueled by a 4% increase in average ticket and a 3% increase in shopping frequency. Digitally-enabled comparable sales grew 23% in Q2.
- Membership: Membership fee revenue rose 14%, driven by new sign-ups and fee increases implemented in September 2024. Total paid members reached 82.1 million. Worldwide renewal rate was 89.7%.
- Profitability: Net income increased 14% in Q2. Gross margin expansion was aided by a non-recurring legal settlement and performance in warehouse ancillary businesses, partially offset by LIFO charges and 2% Executive rewards.
- Segment Performance: U.S. net sales grew 7%, Canada 12%, and Other International 15% in Q2.
Guidance, Outlook, and Risks
- Capital Expenditures: Management intends to spend approximately $6,500 million in fiscal 2026 on new warehouse openings, remodels, and digital infrastructure. $2,815 million was spent in the first half.
- Expansion Plans: The company opened 12 new warehouses (including 2 relocations) in the first half and plans to open 21 additional new warehouses (including 3 relocations) in the remainder of fiscal 2026.
- Dividends and Buybacks: A quarterly dividend of $1.30 per share was declared. Under a $4,000 million repurchase authorization (expiring Jan 2027), $1,542 million remains available. The company repurchased 229,000 shares in Q2.
- Risks and Contingencies:
- Legal Proceedings: Ongoing litigation includes class actions regarding wage/hour violations (California, Washington), opioid abuse impacts, privacy law violations (pixel trackers), and product labeling (Kirkland Signature tequila). Management does not believe these will have a material adverse effect on financial position.
- Market Risks: Exposure to foreign currency fluctuations, inflation, gasoline price volatility, and geopolitical conditions including tariffs.
Investor Verification Checklist
- Verify the sustainability of the 7% comparable sales growth rate, specifically the contribution from average ticket vs. shopping frequency.
- Monitor the impact of the 2% Executive membership rewards and co-branded credit card program on gross margin compression.
- Track the resolution of pending class actions regarding privacy laws and product labeling to assess potential future accruals.
- Confirm the execution of the planned 21 new warehouse openings for the remainder of fiscal 2026 and associated cannibalization risks.
- Review the trajectory of SG&A expenses as a percentage of sales, noting the recent increase due to self-insured claims and central operating costs.