Story Stocks^®

Costco Wholesale (COST) is trading higher after its Q4 report paired better-than-expected earnings with resilient comparable-sales growth, improving renewal rates, and underlying margin progress. Adjusted comparable sales increased 6.7% and digitally enabled comps rose 19.8%, while stronger core profitability and operating leverage are outweighing slower membership growth, a large LIFO charge, and the non-recurring nature of tariff-refund benefits.

• Reported EPS of $6.75 exceeded the $6.54 FactSet consensus, but excluding the $0.15 net tariff-refund benefit, EPS was approximately $6.60. Revenue of $95.72 bln topped the $94.97 bln estimate, although most of the sales result was already known from COST’s monthly reporting.
• Reported gross margin declined 11 bps, but increased 20 bps excluding gasoline inflation, which primarily diluted the percentage through mix. The core-merchandise contribution fell 32 bps, while underlying core margin on COST’s own sales increased 18 bps excluding tariff refunds and reinvestment. SG&A also improved 2 bps excluding gas.
• Fee income increased 7.3% to $1.849 bln, Executive memberships grew 9.4% to 42.3 mln, and renewal rates improved 10 bps sequentially to 92.3% in the U.S./Canada and 89.8% worldwide. Total paid memberships rose 3.8%, marking an eighth consecutive quarter of deceleration, but higher Executive penetration supports spending and retention.
• Worldwide traffic increased 3.3%, ancillary comps rose by the high-20s, and record gas volumes, nearly 20% FY26 pharmacy growth, and double-digit travel gains supported results. Digitally enabled sales exceeded $33 bln for FY26, while Q4 site and app traffic increased 30% and personalization initiatives generated triple-digit growth.
• COST received $184 mln of tariff refunds in Q4 and a similar amount in early Q1, with only slightly more than one-third of expected refunds collected. Management plans to reinvest most proceeds in member value, while the $152 mln Q4 LIFO charge reflected late-year memory and petroleum-related inflation and a full-year accounting true-up.
• FY27 capex is planned at approximately $7.5 bln versus $6.4 bln in FY26, supporting 33 openings, including five relocations, and additional supply-chain and e-commerce capacity; capex growth is expected to moderate after FY27.

Briefing.com Analyst Insight

The positive reaction shows investors are emphasizing COST’s durable demand, improving renewal rates, and underlying efficiency rather than discounting the report because of its tariff-related benefit. Core margin on COST’s own sales expanded, SG&A remained controlled, and adjusted comps held within the 6-7% range despite an uncertain consumer backdrop. Slower paid-membership growth remains the principal concern, but rising Executive penetration, digital engagement, and spending per member provide meaningful offsets. Continued price reinvestment could reinforce COST’s competitive position and support traffic even if it constrains near-term margin expansion. The next test is whether those operating strengths generate attractive returns from the expanding warehouse pipeline and $7.5 bln FY27 capital program.