COSTCO WHOLESALE Q4 FY26 earnings call COST

Costco opened 12 warehouses in Q4 FY26, contributing to a total of 28 openings (25 net new) for the fiscal year, bringing the worldwide count to 939. The company plans to open 33 warehouses (5 relocations) in FY27, targeting 30 net new annually. This expansion includes new U.S. markets, infills in mature U.S. markets, and international growth, with 4 buildings planned for Europe, 5 for Canada, and 1 for Mexico in FY27, alongside a strong pipeline for Asia and Australia in FY28. Management is confident in the ROI of these new buildings, noting new markets attract new members while infills drive quicker sales and profitability maturity.

Digitally enabled sales, including third-party delivery, exceeded $33 billion in FY26, an increase of over 20%. Costco expanded its Uber Eats partnership nationwide and its DoorDash partnership to the U.S., complementing its existing Instacart relationship. These channels primarily drive incremental sales, attracting younger members with average delivery times under an hour. Total site and app traffic increased by 30%, with sales from personalized initiatives showing triple-digit growth and accounting for 10% of all costco.com orders. Traffic from AI search also grew triple digits for the second consecutive quarter, demonstrating the highest conversion rate among all site traffic.

Costco received $184 million in IEEPA tariff refunds in Q4 FY26, comprising $174 million in refunds and $10 million in interest, representing over one-third of the total expected. A similar amount has already been received in Q1 FY27. The company reinvested a significant portion of these funds into price reductions on everyday items (produce, meat, beverages) and non-food items (home furnishings, hardware) to provide value back to members. This strategy aims to reinforce Costco's value proposition, though the immediate impact on monthly sales trajectory has been moderate.

Executive Member penetration reached an all-time high in FY26, contributing to improved renewal rates. The U.S. and Canada renewal rate was 92.3%, and the worldwide rate was 89.8%, both up 10 basis points quarter-over-quarter. The member base under 40 has grown nearly 60% since COVID, now representing over a quarter of total members. While younger members initially spend less, they tend to grow into higher-spending members over time^⏳. Executive members generally renew at a higher rate and spend more, indicating a positive long-term trend for member loyalty and spend.

Overall inflation in Q4 FY26 remained in the low single digits. Non-food inflation increased due to memory costs in consumer electronics and oil-related items, while food and sundries and fresh inflation were consistent with prior quarters, with beef inflation offset by deflation in eggs and dairy. A LIFO charge of $152 million was recorded in Q4, compared to $43 million last year, primarily driven by higher memory costs and inflation in Middle East conflict-affected items. The full fiscal year LIFO charge was slightly over $200 million, indicating approximately 1.5% inflation on total U.S. inventory.