Skip to content
    COST
    Earnings call· Feb 2026(Q2 FY26)

    COSTCO WHOLESALE CORP /NEW COST

    Mar 5, 2026 Source

    Executive summary

    Costco Q2 FY26 — Strong Sales Growth Driven by Digital and Membership Gains

    Costco delivered robust Q2 FY26 results, driven by strong digitally-enabled sales growth and continued expansion of its membership base, particularly executive memberships. The company effectively managed pricing and tariffs, reinvesting savings into member value while slightly expanding gross margins. Strategic investments in new warehouses, digital enhancements, and productivity initiatives are expected to sustain long-term growth, despite some headwinds from LIFO charges and increased SG&A.

    Highlights

    5

    • Net income increased nearly 14% to $2.035 billion or $4.58 per diluted share.

    • Digitally-enabled comparable sales grew 22.6% (21.7% adjusted for FX).

    • Membership fee income rose 13.6% year-over-year to $1.355 billion (12.2% adjusted for FX).

    • Total paid members increased 4.8% to 82.1 million, with executive memberships up 9.5% to 40.4 million.

    • Core-on-core merchandise margins improved by 22 basis points, driven by broad-based gains.

    Concerns

    4

    • LIFO negatively impacted the gross margin rate by 4 basis points, with a $12 million charge this quarter compared to a $12 million credit last year.

    • SG&A rate was higher by 13 basis points (8 basis points without gas deflation), partly due to a 6 basis point impact from increased general liability reserves.

    • The U.S. and Canada renewal rate slightly declined by 10 basis points to 92.1%, attributed to new online members renewing at a slightly lower rate.

    • Gas comparable sales were negative mid-single digits due to mid- to high single-digit price deflation.

    Guidance & targets

    4
    CategoryTargetConfidence
    Net new warehouse openings
    28
    medium materiality
    High
    New warehouse openings
    30-plus per year
    high materiality
    High
    Capital expenditure
    approximately $6.5 billion
    high materiality
    High
    New warehouse openings (geographic split)
    just over half in U.S., just under half in rest of world
    medium materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Total Company
    Q2 FY26 results.
    Comparable sales: 7.4% (reported)Comparable sales: 6.7% (adjusted for gas price deflation and FX)Comparable sales: 7.4% (excluding gas sales entirely and adjusting for the impact of foreign exchange)Digitally-enabled comparable sales: 22.6% (reported)Digitally-enabled comparable sales: 21.7% (adjusted for FX)Traffic: 3.1% worldwideAverage transaction: 4.2% worldwideAverage transaction: 3.5% excluding gas price deflation and changes in FX
    		$68.24 billion9.1%——
    U.S.
    February sales results.
    Comparable sales: 6.0% (adjusted for gas deflation and FX)
    		—5.2% (reported)——
    Canada
    February sales results.
    Comparable sales: 9.3% (adjusted for gas deflation and FX)
    		—12.8% (reported)——
    Other International
    February sales results.
    Comparable sales: 10.9% (adjusted for gas deflation and FX)
    		—17.9% (reported)——

    Operational metrics

    41
    Membership fee income
    $1.355 billionup $162 million or 13.6% YoY
    Q2 FY26

    Membership fee income for the second quarter.

    Membership fee income growth (ex-fee increase, ex-FX)
    7.5%YoY
    Q2 FY26

    Underlying growth in membership fee income.

    Paid Executive Memberships
    40.4 millionup 9.5% versus last year
    Q2 FY26 end

    Total paid executive memberships.

    Total Paid Members
    82.1 millionup 4.8% versus last year
    Q2 FY26 end

    Total paid members.

    Total Cardholders
    147.2 millionup 4.7% year-over-year
    Q2 FY26 end

    Total cardholders.

    U.S. and Canada Renewal Rate
    92.1%down 10 basis points from last quarter
    Q2 FY26 end

    Renewal rate for U.S. and Canada.

    Worldwide Renewal Rate
    89.7%unchanged from last quarter
    Q2 FY26 end

    Worldwide renewal rate.

    LIFO impact on gross margin rate
    negative 4 basis points
    Q2 FY26

    LIFO negatively impacted the gross margin rate.

    Legal settlement impact on gross margin rate
    positive 5 basis points
    Q2 FY26

    Nonrecurring legal settlement had a positive impact.

    SG&A operations component change
    higher or worse by 2 basis points
    Q2 FY26

    Operations component of SG&A.

    SG&A central component change
    higher or worse by 4 basis points
    Q2 FY26

    Central component of SG&A.

    General liability reserves impact on SG&A rate
    negative 6 basis points
    Q2 FY26

    Increase in general liability reserves negatively impacted the rate.

    Interest expense
    $33 millionversus $36 million last year
    Q2 FY26

    Interest expense.

    Interest income
    $140 millionversus $109 million last year
    Q2 FY26

    Interest income.

    FX and other benefit
    $8 millionversus $33 million benefit last year
    Q2 FY26

    FX and other below operating income.

    Tax rate
    25.2%compared to 26.2% in Q2 last year
    Q2 FY26

    Income tax rate.

    Capital expenditure
    $1.29 billion
    Q2 FY26

    Capital expenditure in Q2.

    Kirkland Signature value proposition
    15% to 20%
    Q2 FY26

    KS items typically offering value compared to national brands.

    New Kirkland Signature items launched
    approximately 30
    Q2 FY26

    New KS items launched in Q2.

    KS Butter price
    $8.49down from $13.89 at Q1 end
    Q2 FY26 end

    Example of price reduction.

    KS Organic Coconut Water price (12-count)
    $10.99down from $12.79
    Q2 FY26 end

    Example of price reduction.

    KS Organic Seaweeds price
    $9.99down from $10.99
    Q2 FY26 end

    Example of price reduction.

    KS Italian Extra Virgin Olive Oil price (2-liter)
    $24.99down from $29.99
    Q2 FY26 end

    Example of price reduction.

    Site traffic growth
    32%YoY
    Q2 FY26

    Site traffic in the quarter.

    App traffic growth
    45%YoY
    Q2 FY26

    App traffic in the quarter.

    Personalized product recommendation carousels sales
    $470 million
    Q2 FY26

    Sales driven by personalized product recommendation carousels.

    Net sales
    $21.69 billionup 9.5% from $19.81 billion last year
    February FY26

    Net sales for the 4 weeks ended March 1.

    Traffic
    3%up YoY
    February FY26

    Comp traffic or frequency for February.

    Traffic
    1.5%up YoY
    February FY26

    Comp traffic or frequency for February.

    FX impact on sales
    1.7%
    February FY26

    Foreign currencies year-over-year relative to the U.S. dollar.

    FX impact on sales
    5%
    February FY26

    Foreign currencies year-over-year relative to the U.S. dollar.

    FX impact on sales
    8%
    February FY26

    Foreign currencies year-over-year relative to the U.S. dollar.

    Gas price deflation impact on comp sales
    negative 85 basis points
    February FY26

    Gas price deflation negatively impacted total reported comp sales.

    Average worldwide selling price per gallon change
    down 7.5%versus last year
    February FY26

    Average worldwide selling price per gallon.

    Average transaction
    up 4.8%
    February FY26

    Worldwide average transaction.

    Average transaction (ex-gas/FX)
    up 3.9%
    February FY26

    Worldwide average transaction excluding gas deflation and FX.

    Cannibalization impact on total company comp sales
    approximately 60 basis points
    February FY26

    Negative impact of cannibalization for the total company.

    Gas station cross-shop rate
    about half
    ongoing

    Historically, cross-traffic from gas stations to clubs.

    Warehouse count
    114
    Q2 FY26

    Total buildings in Canada.

    Retail media revenue growth
    double digits
    current

    Meaningful amount of dollars generated from media revenue today.

    Pharmacy business growth
    faster pace than total sales
    Q2 FY26

    Pharmacy business grew at a faster pace than our total sales.

    Industry KPIs

    10
    MetricValueDetails
    Sg a rate9.19%% of sales
    Marketplace 3p GMV—
    Gross margin drivers11.02%%
    Fuel gas station economicsnegative mid-single digits%
    Warehouse store club count924warehouses
    Comparable same store sales7.4%%
    E commerce digital sales growth22.6%%
    Advertising retail media revenuedouble digits
    Private label own brand penetration—
    Category level comps and inflation deflationlow single digits%

    Risks & headwinds

    5
    Tariffs (IEEPA replaced by new global tariffs)at least the next 150 days

    extremely fluid

    Mitigation: Moving production, consolidating buying, leaning on Kirkland Signature, sourcing domestically.

    Middle East instability impact on fuel costs and shippingrest of the fiscal year

    could impact fuel costs and shipping schedules

    Mitigation: Watching cautiously, staying on top of it.

    LIFO chargeQ2 FY26

    $12 million charge in Q2 this year compared to a $12 million credit in Q2 last year

    Increased general liability reservesQ2 FY26

    negatively impacted the rate by 6 basis points

    Mitigation: Reflects higher expected future costs for prior year claims not yet settled.

    Online members renewing at a slightly lower rateongoing

    U.S. and Canada renewal rate was 92.1%, down 10 basis points from last quarter

    Mitigation: Targeted digital communications and retention strategies.

    What to watch in Q3 FY26

    5

    U.S. and Canada renewal rate

    next quarter
    Current92.1%
    Targetstabilization or improvement

    Why it matters

    Management expects a few more quarters of slight decline but is implementing retention strategies; verification of their effectiveness is key for membership loyalty.

    When we called that out 2 or 3 quarters ago, we said we probably have a few more quarters that where we'd expect to see a continuation of a slight decline in the renewal rate because there is that sort of math where those numbers are feeding into the overall renewal calculation, it does bring down the average.

    Q&A highlights

    5

    How did January/February weather affect sales and traffic? What was the impact of gold sales, and how might it play out?

    Weather caused some volatility but no major impact on total sales, though February U.S. traffic was lighter due to Northeast closures. Gold sales were a tailwind, driving interest and traffic to websites, elevating awareness for other online offerings. Overall trends remain consistent with members focused on value and quality.

    “I think the one thing that I probably would mention is that our traffic visits were a little bit lighter in the U.S. in February. The thing that we think may have caused that to look a little bit lighter was because of the weather we had in the Northeast, in particular, we have 55 warehouses that were closed for a full day and then took a couple of days for the local communities to get back up to sort of speed.”

    asked by Chris Horvers · answered by Gary Millerchip

    2 min read5 chapters

    Detailed Narrative

    01

    Tariff Management and Pricing Strategy

    Ron Vachris discussed the fluid impact of tariffs, noting that IEEPA tariffs were replaced by new global tariffs for at least 150 days. Costco's strategy includes moving production, consolidating buying, leaning on Kirkland Signature, and sourcing domestically to mitigate impact. The company aims to return any potential IEEPA tariff refunds to members through lower prices. Costco lowered prices on key items such as eggs, cheese, coffee, and paper products due to lower commodity inflation, and on affected items like textiles and cookware due to reduced tariffs.

    02

    Digital and AI Enhancements

    Costco is advancing its digital roadmap to create a seamless member experience. Mobile wallet enhancements, pharmacy pay-ahead, and employee pre-scan technology are improving checkout speed and productivity in warehouses. Automated pay stations are being piloted, showing an average transaction time of 8 seconds. Online, new personalization capabilities are driving measurable e-commerce sales growth, with personalized product recommendation carousels generating over $470 million in Q2. The company is also working with leading AI companies to ensure its value proposition is visible to members using AI tools.

    03

    Real Estate Expansion and Innovation

    The company expects 28 net new warehouse openings in FY26 and targets 30+ new openings annually in coming years, with roughly half in the U.S. and half internationally. Costco is exploring creative real estate solutions, such as parking decks and mixed-use developments (e.g., Los Angeles with residences above), to enter dense urban markets where traditional 25-acre sites are unavailable. This approach, drawing on international experience, allows for continued expansion in strong markets.

    04

    Merchandising Highlights and Inflation Trends

    Q2 showcased global buying expertise with Lunar New Year items and a successful Valentine's Day. Fresh comparable sales were up low double digits, led by meat and bakery. Nonfood comps were up high single digits, with top performers including gold and jewelry, tires, and small electrics, driven by unique items like a $150,000 diamond ring and a $20,000 Babe Ruth baseball. Food and sundries grew mid-single digits, despite egg price deflation. Overall inflation decreased slightly in Q2, with deflation in produce, eggs, and dairy, partially offset by slightly higher nonfood inflation.

    05

    Membership Dynamics and Renewal Rates

    Membership fee income grew 7.5% year-over-year excluding fee increases and FX, driven by a 9% increase in executive membership upgrades. Total paid members grew 4.8% to 82.1 million. The U.S. and Canada renewal rate saw a slight 10 basis point decline to 92.1%, while the worldwide rate remained flat at 89.7%. This decline is attributed to the increasing proportion of new online members, who typically renew at a slightly lower rate. Costco is implementing targeted digital communications and retention strategies to improve renewal rates for these members.

    AI-generated summary of the company’s earnings call. Not investment advice.