Market Notes: What Costco's Earnings Told Long-Term Investors

Costco Wholesale (Nasdaq: COST) closed out its fiscal year on Thursday, September 24, reporting fourth-quarter and full fiscal 2026 results after the market closed. We cover it because it is one of the most widely followed consumer companies in the market, not because it is a recommendation (see the disclosures below).

What did Costco report?

For the 16 weeks ended August 30, 2026, net sales rose 11.2% to $93.9 billion, and total revenue, which adds in membership fees, reached $95.7 billion. Membership fee income grew 7.3% to $1.85 billion. Operating income rose 13.8% to $3.80 billion, net income rose 14.9% to $3.00 billion, and diluted earnings per share rose 15.0% to $6.75, up from $5.87 a year earlier. For the full fiscal year, net sales grew 10.1% to $297.2 billion and diluted EPS grew 14.0% to $20.76 (SEC Form 8-K, Exhibit 99.1).

Comparable sales for the quarter rose 9.4% on a reported basis, or 6.7% excluding gasoline prices and foreign exchange. By region, adjusted comparable sales were 7.2% in the U.S., 4.6% in Canada, and 6.2% in other international markets. Digitally-enabled sales grew 19.5% for the quarter and 20.9% for the full year (same filing).

Where did the growth come with an asterisk?

Two items are worth separating from the headline numbers. First, $0.15 of the $6.75 in quarterly diluted EPS came from a non-recurring item. Costco received $184 million of IEEPA tariff refunds in the quarter, which CFO Gary Millerchip described as a little more than one-third of the total expected, and he said the company intends to keep reinvesting the majority of those dollars in lower prices for members. Excluding that benefit, he said net income rose 12.3% and EPS rose 12.4%, compared with the reported 14.9% and 15.0% (earnings call transcript).

Second, the reported gross margin rate declined 11 basis points to 11.02%, from 11.13% a year earlier. Millerchip said LIFO accounting reduced the rate by 11 basis points, with a $152 million LIFO charge in the quarter compared with $43 million a year earlier, driven mainly by higher memory costs in consumer electronics and inflation in items such as gas, motor oil, and resins (same transcript).

Membership is the other place to look closely. Costco ended the quarter with 84.1 million total paid members, up 3.8% from a year earlier. A Truist analyst noted on the call that membership growth has slowed for eight quarters in a row. Vachris pointed to Executive Member penetration reaching an all-time high and said, "Renewal rates showed improvements again this quarter." Millerchip put the U.S. and Canada renewal rate at 92.3%, up 10 basis points from the prior quarter. A UBS analyst also asked whether roughly $100 million of tariff-refund price investment was changing the trajectory of sales, which he said had moderated slightly. Millerchip answered that sales excluding gas and currency effects have held in a 6% to 7% range for about a year, with non-food merchandise the strongest category in the quarter (same transcript).

In pharmacy, CEO Ron Vachris said sales grew nearly 20%, and that double-digit prescription growth for the year more than offset the headwind from lower prices tied to Medicare Maximum Fair Price changes (same transcript).

How is Costco spending the money it makes?

Vachris said Costco opened 28 warehouses in fiscal 2026, including three relocations, bringing the total to 939 worldwide, and that the current plan is to open 33 more in fiscal 2027, five of them relocations. Millerchip said capital expenditure was $6.4 billion for the year and is planned at approximately $7.5 billion for fiscal 2027, predominantly because of that warehouse pipeline (same transcript).

How did the market react?

Costco shares closed at $896.48 on Thursday, September 24, in regular trading before the results were released. On Friday, September 25, shares opened at $887.00 and closed at $922.77, up 2.9% from Thursday's close (Yahoo Finance).

The bottom line for long-term investors

Costco's fiscal 2026 shows growth across regions and channels, with digitally-enabled sales growing faster than the business overall. It also shows the trade-offs underneath that growth: part of the quarter's earnings increase came from a non-recurring refund rather than ongoing operations, the gross margin rate edged down on inventory-cost accounting, and total membership growth has continued to slow even as renewal rates improved. None of that settles the long-term picture on its own. It is the kind of detail a headline that just says "beat expectations" tends to leave out.

A note worth highlighting: When a company reports a one-time benefit, it is worth asking what growth would look like without it. Here, management disclosed that figure itself: EPS growth was 15.0% including the tariff-refund benefit and 12.4% without it. Both numbers are accurate; they simply answer different questions.

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