Costco Wholesale Corporation COST reported third-quarter fiscal 2026 results, wherein both top and bottom lines surpassed the Zacks Consensus Estimate. The company delivered solid year-over-year growth in revenues and earnings, supported by healthy traffic trends, higher average ticket, strong digitally enabled demand, membership growth and robust performance across key merchandise categories.
Costco’s focus on delivering value, quality and newness continues to resonate with members. Management highlighted record gasoline volumes during the quarter as members increasingly turned to Costco for fuel savings amid elevated gas prices.
The company continued rolling out technology enhancements, including expanded mobile cake ordering, broader international deployment of shopping-cart pre-scan technology and increased use of app-based notifications. Management also highlighted growing opportunities from artificial intelligence-driven product search and personalized product recommendations, which generated higher conversion rates during the quarter.
Costco’s Quarterly Performance: Key Metrics and Insights
Costco posted quarterly earnings of $4.93 per share, which came ahead of the Zacks Consensus Estimate of $4.91. The figure improved 15.2% year over year, up from $4.28 per share in the prior-year period.
Total revenues, comprising net sales and membership fees, increased 11.6% year over year to $70,527 million, surpassing the Zacks Consensus Estimate of $69,505 million. Net sales grew 11.6% to $69,154 million. The strong top-line performance was driven by healthy comparable sales growth, robust membership trends and continued momentum in digital channels.
Comparable sales jumped 9.8% year over year, or 6.6% excluding the impacts of gasoline price changes and foreign exchange fluctuations. Global traffic, or shopping frequency, rose 2.4%, while average ticket increased 7.3%, reflecting higher spending levels and a favorable merchandise mix. Adjusted ticket growth, excluding gasoline and foreign exchange impacts, was 4.2%. Digitally enabled comparable sales surged 21.5%, underscoring continued strength in Costco’s e-commerce platform and member engagement initiatives. Site and app traffic increased by 37%.
Regionally, comparable sales increased 9.4% in the United States, 10.7% in Canada and 11.2% in Other International markets. Excluding gasoline and foreign exchange impacts, comparable sales rose 6.8%, 6.2% and 5.9%, respectively.
Across merchandise categories, fresh foods delivered high-single-digit comparable sales growth, led by meat and bakery. Nonfoods recorded high-single-digit comparable sales gains, driven by strength in gold and jewelry, small electrics, tires, home furnishings, majors, and health and beauty products. Food and sundries posted mid-single-digit growth, supported by packaged foods, candy and protein-focused products. Ancillary businesses remained a standout performer, with pharmacy generating significant market-share gains and benefiting from strong demand for GLP-1 medications.
Costco Wholesale Corporation Price, Consensus and EPS Surprise
Costco Wholesale Corporation price-consensus-eps-surprise-chart | Costco Wholesale Corporation Quote
Costco Achieves Membership Growth Despite Tough Environment
Membership fee income increased 10.7% year over year to $1,373 million, or 9.9%, excluding foreign exchange impacts. Growth benefited from continued expansion of the membership base, upgrades to executive memberships and the impact of the membership fee increase implemented in September 2024.
Costco ended the quarter with 82.9 million paid memberships, up 4.1% from the prior-year period, while total cardholders increased 4% to 148.5 million. Executive memberships rose 9.6% year over year to 41.2 million, reflecting continued member engagement and upgrades. Executive members accounted for approximately 75% of worldwide sales.
The company maintained strong renewal rates, with the U.S. and Canada renewal rate improving 10 basis points sequentially to 92.2%, while the worldwide renewal rate remained unchanged at 89.7%. Costco also launched its Executive Membership program in China during the quarter and reported strong early adoption.
Costco’s Margins and Profitability
Gross margin contracted 21 basis points year over year to 11%. However, excluding the impact of gasoline price inflation, gross margin improved by 1 basis point. Costco continued investing in value by lowering prices on several everyday products, including eggs and beef, while transportation costs associated with higher fuel prices created headwinds.
The SG&A rate rose 20 basis points year over year to 9%, benefiting from productivity improvements and leverage on higher sales volumes. Excluding gasoline impacts, SG&A improved 2 basis points. Operating income increased 11.3% year over year to $2,815 million.
Costco’s Store Updates and Expansion Plans
Costco currently operates 931 warehouses worldwide, including 639 locations in the United States and Puerto Rico, 115 in Canada, 43 in Mexico, 37 in Japan, 29 in the United Kingdom, 20 in Korea, 15 in Australia, 14 in Taiwan, seven in China, five in Spain, three in France, two in Sweden, and one each in Iceland and New Zealand.
During the third quarter, the company opened four net new warehouses, including three in the United States and one Canadian business center. Management now expects to open 26 net new warehouses in fiscal 2026, with longer-term plans targeting 30-plus net new openings annually. Costco estimates ending fiscal 2026 with approximately 940 warehouses globally.
Costco’s Financial Health Snapshot
Costco ended the third quarter of fiscal 2026 with $18,946 million in cash and cash equivalents compared with $14,161 million at the end of fiscal 2025. Long-term debt, excluding the current portion, stood at $5,670 million, while shareholders’ equity totaled $33,509 million. Operating cash flow for the first 36 weeks of fiscal 2026 increased to $11,133 million from $9,468 million in the year-ago period.
Capital expenditures were approximately $1.41 billion during the quarter. Costco continues to expect fiscal 2026 capital expenditures of roughly $6.5 billion, supporting warehouse expansion, remodels, supply-chain investments and digital initiatives.
Final Words on Costco
Management noted that consumers remain focused on value amid macroeconomic uncertainty, elevated gasoline prices and potential tariff-related impacts. Costco reiterated its strategy of being “the first to lower prices and the last to raise them,” highlighting recent price reductions across Kirkland Signature products. The company remains optimistic about long-term growth opportunities across warehouse expansion, digital engagement, retail media, pharmacy, AI-enabled shopping experiences and international markets, particularly China, Canada, Japan, Korea and Spain.
Shares of this Zacks Rank #3 (Hold) company have advanced 15.6% year to date compared with the industry’s rise of 12.5%.
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