Costco Wholesale Corporation

For the third quarter of fiscal 2026, Costco reported net income of $2.192 billion, or $4.93 per diluted share, up 15% from $1.903 billion, or $4.28 per share, last year. Net sales were $69.15 billion, up 11.6% year over year, and comparable sales rose 9.8% (6.6% adjusted for gas price inflation and FX). Digitally enabled comparable sales increased 21.5% (20.8% adjusted for FX). Membership fee income was $1.373 billion, up $133 million, or 10.7%. Gross margin was 11.04% versus 11.25% last year; excluding gas inflation, it was up 1 basis point. SG&A was 8.96% versus 9.16% a year ago. CapEx was $1.41 billion in Q3, and full-year CapEx is expected to be approximately $6.5 billion. Management said it now expects 26 net new openings in fiscal 2026, down 2 buildings from the prior call, with those openings now shifting to fiscal 2027.

Ron Vachris said Costco’s value proposition continues to resonate despite macro uncertainty, and he emphasized the quarter’s record gas volumes as evidence that members are highly price sensitive and responding to Costco’s low-price stance. He also highlighted the company’s focus on member value through Kirkland Signature launches, tariff refund claims, and lower prices where possible, saying Costco aims to be “the first to lower prices and the last to raise them.” Strategically, he framed growth as coming from new warehouses, relocations, digital improvements, same-day delivery, and emerging AI-driven shopping visibility.

Gary Millerchip said the quarter was driven by strong top-line growth, membership expansion, and mix benefits, while margins reflected deliberate price investment and some cost pressures. He noted gross margin was 11.04%, core-on-core margins were down 9 basis points, and the main drivers included lower prices on everyday items like eggs and beef plus higher transportation costs from gas. SG&A improved to 8.96%, but health care costs and some legal settlements/reserves offset underlying productivity gains; he also cited $44 million of LIFO expense versus $130 million last year, $130 million of interest income versus $95 million last year, and a 25.4% tax rate. On capital allocation, he said the priority remains reinvesting in warehouses, depots, manufacturing capacity, and digital, while excess cash may be returned through special dividends, though there is no current plan to announce one.

Analysts focused on whether slower membership growth, at 4.1%, should imply more modest near-term comp growth, and management replied that membership momentum remains healthy when adjusted for fee increases and FX, with renewal rates stabilizing and Executive Memberships up 9.6%. On margins, management said the 9 basis point decline in core-on-core margin was not a sign of defensive weakness but a deliberate choice to invest in value, especially while cycling a large prior-year LIFO charge and facing higher gas prices. Questions also centered on retail media, delivery speed, traffic normalization, and capital allocation; management said retail media and AI are being pursued through a member-first lens, same-day delivery is working well through third parties, traffic remains healthy on a two-year basis, and there is no current special dividend plan despite excess cash.