Costco Q4 FY2026 Earnings: Core Sales Hold Near 7% as Tariff Refunds Lift EPS

Costco closed fiscal 2026 with 11.2% fourth-quarter sales growth and adjusted comparable-sales growth of 6.7% excluding gasoline and foreign exchange. The underlying business remained healthy across merchandise, ancillary services and digital channels, while a $184M tariff refund added a nonrecurring $0.15 per share benefit after Costco reinvested part of the proceeds in lower prices.

The quarter’s central investment takeaway is that Costco continues to produce broad-based growth despite a more normalized membership-growth environment. Management is also accelerating warehouse development and supply-chain investment, raising planned fiscal 2027 capital expenditure to about $7.5B.

Earnings Snapshot

The Bigger Story

Costco’s reported earnings received a lift from tariff refunds, but the more important result was continued mid-to-high-single-digit underlying comparable-sales growth. Comparable sales rose 6.7% excluding gasoline and foreign exchange, extending a roughly year-long period in which Costco has sustained that range, according to management.

The company is using a portion of tariff-related proceeds to reinforce its price advantage rather than retaining all of the benefit. Costco received $184M of refunds during the quarter, including $174M of refunds and $10M of interest, and management said it had already received a similar amount early in fiscal 2027. The company intends to reinvest the majority of future refunds in member value, meaning the accounting benefit should not be viewed as a recurring profit driver.

At the same time, Costco is increasing investment in physical capacity. The company opened 25 net warehouses in fiscal 2026 and plans 28 net openings in fiscal 2027, moving toward a target of 30 net new locations annually. That expansion supports the long-term sales opportunity, but it also explains why capital spending is rising materially before management expects the growth rate of CapEx to slow beyond fiscal 2027.

Revenue and Operating Performance

Fourth-quarter net sales increased 11.2% to $93.87B. Gasoline inflation contributed about 3 percentage points to comparable sales, while foreign exchange reduced sales by roughly 0.3 percentage points. Excluding both factors, comparable sales increased 6.7%.

Traffic, or shopping frequency, increased 3.3% worldwide. Average ticket rose 5.9%, or 3.3% excluding gasoline-price inflation and foreign exchange. The combination indicates that sales growth continued to reflect both higher member engagement and spending per visit rather than ticket inflation alone.

Nonfood categories were the strongest merchandise area, with comparable sales up mid- to high-single digits. Management cited gold and jewelry, home furnishings, housewares, small electrics, and health and beauty as leading departments. Strong nonfood performance is notable because it suggests members continued spending on discretionary products where Costco offered compelling value, despite a consumer environment that management characterized as value-conscious.

Fresh comparable sales increased mid-single digits, led by bakery and meat. Food and sundries grew low to mid-single digits, with packaged foods, sundries and frozen foods leading. Costco also cited growth in healthier packaged-food and protein-oriented products.

Ancillary businesses were another major contributor, with comparable sales up in the high-20% range. Gasoline, pharmacy and travel led the growth. Gasoline comparable sales increased in the mid-30% range, driven by higher prices per gallon and record fuel volumes. Pharmacy sales rose nearly 20% during fiscal 2026, with higher prescription volume more than offsetting pricing pressure tied to Medicare Maximum Fair Price changes.

Digital momentum remained strong. Digitally enabled sales exceeded $33B for the full fiscal year, up more than 20%, while digitally enabled comparable sales grew 19.5% in the fourth quarter. Management said site and app traffic rose 30%.

Costco is also expanding third-party delivery access. Its Uber Eats partnership is moving from 17 states to nationwide U.S. coverage, while DoorDash is expanding to include the U.S. These offerings supplement Costco’s longer-standing Instacart relationship. Management said orders through these channels have largely been incremental to warehouse grocery purchases, though that conclusion will need to be validated as the programs scale.

Profitability and Margins

Net income was $3.0B, or $6.75 per diluted share. Results included a $0.15-per-share nonrecurring benefit from tariff refunds, net of Costco’s partial reinvestment of those proceeds in lower prices. Excluding that benefit, net income increased 12.3% and EPS increased 12.4% from the prior-year quarter.

The reported gross margin rate declined 11 basis points to 11.02%. That headline understates the underlying merchandise-margin performance because gasoline inflation and inventory accounting weighed on the reported figure. Excluding gasoline inflation, gross margin increased 20 basis points.

Costco recorded a $152M LIFO charge in the quarter, compared with a $43M charge a year earlier. Management said the larger charge primarily reflected higher memory costs in consumer electronics and inflation in products affected by higher petroleum prices, including gas, motor oil and resins. Because Costco’s LIFO calculation requires a year-end true-up, inflation that emerged later in the year had an outsized fourth-quarter accounting effect.

Core merchandise margins on core sales increased 18 basis points excluding tariff refunds and related reinvestment. Costco cited supply-chain efficiencies, higher labor productivity in fresh departments, strong nonfood sell-through and favorable sales mix within nonfood categories. Those gains were partly obscured in reported margins because gas, e-commerce and pharmacy, which carry different margin profiles, grew faster than core merchandise.

The tariff refunds generated a net 9-basis-point benefit to gross margin after price reinvestment. Costco has excluded that item from its core margin discussion and plans to disclose the net impact in future quarters while refunds and reinvestment continue.

SG&A improved 27 basis points year over year to 8.94% of sales. Excluding gasoline inflation, SG&A improved by 2 basis points. Management did not identify a major new expense pressure, although it noted that general liability and health-care costs have been rising faster than other operating costs.

Demand, Customers and Pricing

Membership trends remained constructive, though growth has normalized from the unusually strong post-pandemic period. Costco ended the quarter with 84.1M paid members, up 3.8%, and 150.4M cardholders, up 3.6%.

The higher-value executive tier continued to grow more quickly. Paid executive members rose 9.4% to 42.3M, reaching a record penetration of the membership base. Management views executive growth as important because executive members generally spend more and renew at higher rates than Gold Star members.

Renewal rates also improved modestly. The U.S. and Canada rate increased 10 basis points sequentially to 92.3%, while the worldwide rate rose 10 basis points to 89.8%.

Management emphasized the increasing presence of younger members. Members under 40 have grown nearly 60% since before the pandemic and now represent more than one-quarter of Costco’s membership base. These members initially spend less, management said, but typically increase spending as household size and income rise. That provides a longer-term growth opportunity, though it also means membership growth alone may not immediately translate into peak sales per member.

Costco continued reducing selected prices during the quarter, including Kirkland Signature walnuts, Colombian whole-bean coffee, facial towels and black pepper. Management said it is working with vendors to manage commodity and freight inflation and has visibility ranging from roughly 30 to 90 days depending on the product.

Overall inflation remained in the low-single digits. Food and fresh categories saw inflation in products including beef, steel, flour and some resin-based goods, offset by deflation in eggs, dairy, butter and cheese. Management expects uncertainty surrounding oil-related costs, Middle East disruptions and tariffs to remain the primary variables affecting the inflation outlook.

What is Costco Wholesale’s guidance and outlook?

Costco did not provide formal sales or earnings guidance.

Management plans to open 33 warehouses in fiscal 2027, including five relocations, for 28 net new openings. The plan includes four locations in Europe, five in Canada and one in Mexico, with a broader international pipeline in Asia, Australia and other markets expected in fiscal 2028.

The company is targeting a long-term pace of 30 net new warehouses annually. Management said new-market openings can drive substantial member sign-ups, while infill locations in mature markets generally have a faster path to sales and profitability despite generating fewer new memberships.

Costco expects fiscal 2027 capital expenditure of approximately $7.5B, up from $6.4B in fiscal 2026. The increase is tied to the expanding warehouse pipeline and continued supply-chain spending to support both warehouse and e-commerce growth. Management expects the rate of CapEx growth to slow after fiscal 2027 following three years of elevated investment.

Balance Sheet, Cash Flow and Capital

Costco spent $2.21B on capital expenditure in the fourth quarter and $6.4B for the full fiscal year. The higher fiscal 2027 investment plan makes capital allocation a more relevant consideration than usual, although management said the spending is intended to support a multi-year warehouse expansion strategy and improve supply-chain capacity.

Interest expense was essentially flat at $44M, compared with $45M a year earlier. Interest income increased to $209M from $169M, reflecting higher cash balances and $10M of tariff-refund interest.

The planned CapEx increase is being framed as a growth investment rather than a response to liquidity needs.

What Investors Should Watch

1. Underlying Comparable Sales

The key measure remains comparable-sales growth excluding gasoline and foreign exchange. Costco sustained 6.7% growth in the fourth quarter, but gasoline added substantially to reported sales. Continued strength in traffic, nonfood categories and average ticket would support the case that growth remains broad-based.

2. Membership Growth Versus Member Quality

Paid membership growth was 3.8%, while executive memberships grew 9.4%. Investors should watch whether higher executive penetration and better renewal rates translate into durable spend-per-member growth as membership additions normalize.

3. Tariff Refunds and Price Reinvestment

The $0.15-per-share tariff-related benefit was explicitly nonrecurring, and management expects further refunds in fiscal 2027. The relevant question is not the refund amount alone, but how much Costco reinvests in lower prices and whether those investments support unit growth and member loyalty without eroding underlying margins.

4. Margin Resilience Amid Inflation

Core merchandise margins improved, but LIFO charges and mix effects reduced reported gross margin. Investors should monitor consumer-electronics memory costs, petroleum-linked inflation and freight costs, as well as Costco’s ability to offset them through sourcing, productivity and pricing.

5. Returns on Accelerating Capital Spending

Fiscal 2027 CapEx is expected to reach about $7.5B as Costco increases warehouse openings and supply-chain investment. The pace of new-club productivity, particularly in international markets, will matter in determining whether the heavier investment supports sales and profitability at attractive returns.

AlgovestIQ Takeaway

Costco’s fourth quarter was stronger than the reported headline alone suggests. While tariff refunds added a one-time benefit to EPS, the core business maintained 6.7% comparable-sales growth excluding gasoline and foreign exchange, with positive traffic, strong nonfood performance, rapid digital growth and continued momentum in ancillary categories.

The company’s margin profile was more mixed. Core merchandise margins improved through supply-chain efficiencies, labor productivity and favorable category performance, but reported gross margin declined because of LIFO charges, sales mix and gasoline-related effects. The tariff-refund benefit should not be treated as an ongoing earnings tailwind because management intends to return most future proceeds to members through lower prices.

Membership remains a strength, particularly at the executive tier, but headline member growth has normalized. Costco’s thesis increasingly depends on growing spending and engagement within its existing base, including younger members who may have lower initial spend but longer lifetime potential.

The main strategic shift is the larger investment cycle. Costco plans to increase capital spending to about $7.5B in fiscal 2027 while accelerating toward 30 net new warehouse openings per year. That plan could extend the company’s growth runway, but it raises the execution bar: investors will want evidence that new warehouses, supply-chain investments and delivery partnerships increase member engagement and sales without weakening returns or operating leverage.