Costco Wholesale Corporation’s COST third-quarter fiscal 2026 results suggest that its digital business is evolving from a supporting channel into a meaningful growth engine. The company reported digitally enabled comparable sales growth of 21.5%, significantly outpacing total comparable sales growth of 9.8%. Adjusted digitally enabled comparable sales rose 20.8%, while site and app traffic jumped 37%, highlighting strong engagement across its digital ecosystem.
The momentum is being driven by more than just online transactions. Management pointed to a series of technology investments that are improving the member experience across both digital and warehouse channels. Enhancements such as digital membership card access, mobile wallet improvements, expanded cake ordering through the Costco app and the international rollout of its shopping cart pre-scan tool are helping simplify shopping and checkout processes.
Costco is also seeing tangible benefits from personalization efforts. In the quarter, personalized product recommendation carousels generated conversion rates three times higher than normal levels and contributed nearly $500 million in e-commerce sales. This indicates that the retailer is becoming more effective at connecting members with relevant products while driving higher digital engagement.
Another emerging opportunity is artificial intelligence. Costco noted triple-digit growth in traffic generated through AI-powered search platforms, with this traffic delivering the highest conversion rates among all sources. While still small today, management views AI-driven discovery as a potentially significant channel for attracting shoppers and highlighting Costco’s value proposition.
How Costco Compares With Walmart and Target
Walmart Inc. WMT continues to strengthen its digital ecosystem through faster fulfillment, marketplace expansion and AI-powered shopping tools. In the first quarter of fiscal 2027, Walmart reported a 26% increase in global e-commerce sales, driven by store-fulfilled delivery, marketplace growth and advertising services. Marketplace sales in the United States surged 50%, while Walmart highlighted rising engagement with its AI shopping assistant, Sparky and growing membership revenues from Walmart+.
Target Corporation TGT is also investing in its omnichannel capabilities. In the first quarter of fiscal 2026, Target reported growth across both stores and digital channels, supported by higher traffic and technology investments. Target is enhancing digital merchandising, improving product discoverability and leveraging its stores-as-hubs model, which fulfills more than 95% of sales through stores. As Target accelerates technology initiatives and digital integration, it is aiming to deliver a more seamless shopping experience for guests.
What the Latest Metrics Say About Costco
Costco has seen its shares tumble 3.3% in the past three months compared with the industry’s decline of 1.5%.
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From a valuation standpoint, Costco's forward 12-month price-to-earnings ratio stands at 44.22, higher than the industry’s ratio of 31.29. However, it is trading below its 12-month median level of 46.71, indicating some moderation in valuation despite sustained investor confidence in the stock.
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The Zacks Consensus Estimate for Costco’s current financial-year sales and earnings per share implies year-over-year growth of 9.3% and 13.3%, respectively. For the next fiscal year, the consensus estimate indicates a 7.7% rise in sales and 10.2% growth in earnings.
The consensus estimate for earnings per share for the current and next fiscal year has increased by 6 cents and 7 cents to $20.38 and $22.45, respectively, in the past 30 days.
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Costco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).