COSTCO WHOLESALE CORP (COST) Q1 2026 Earnings Call Transcript
Bullish Discount Stores 437.33B USA
Next Earnings
2026-07-29
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Costco posted solid Q2 results with double-digit earnings growth, rising net sales, and a growing membership base, while advancing its real estate, digital, and pricing initiatives to sustain top-line momentum.
⭐ Key Highlights
Strong quarterly sales and earnings
Q2 net sales rose 9.1% to $68.24 billion and net income increased about 14% to $2.035 billion ($4.58 per share).
Membership growth remains solid but decelerating
Total paid members rose 4.8% YoY to 82.1 million with executive memberships up 9.5% to 40.4 million; overall renewal rates dipped modestly in the US (−10 bps) as online member mix grows.
Digital and value initiatives driving mix and margins
Digitally-enabled comparable sales surged about 22% (adjusted ~21.7% FX), and core-on-core gross margins rose ~0.22 percentage points aided by mix and cost controls.
Real estate and growth pipeline expanding
Opened 4 warehouses in the quarter, bringing total to 924; FY26 net openings guidance raised to 28 with a longer-term target of 30+ per year.
Operational efficiency and pricing strategy
Company continued to lower prices on select items (e.g., Kirkland products) as inflation cooled, while investments in automation and AI-enabled personalization supported traffic and throughput.
✔Positive Signals
- Net sales up 9.1% to $68.24B and net income up ~14% to $2.035B
- Digitally-enabled comparable sales up ~22% (adjusted ~21.7% FX)
- Executive memberships up 9.5% to 40.4M; total paid members 82.1M
- 29 net new openings planned in FY26 guidance (28 net new; 30+ long-term) and ongoing real estate expansion
- Core-on-core gross margins up 22 bps, aided by mix and pricing actions
✖Negative Signals
- U.S. renewal rate declined ~10 basis points, reflecting online member growth mix
- Gas price deflation remains a headwind in some categories
- LIFO charge of $12M vs $12M credit last year partially offset margin gains
- Higher general liability reserves and ongoing tariff uncertainty could pressure margins
- Potential Middle East-related cost volatility could affect fuel and shipping costs
📊Financial Results
- Net income $2.035B, up from $1.788B in the prior year
- Net sales $68.24B, up from $62.53B prior year
- Comparable sales up 7.4% (6.7% ex gas/FX); digitally-enabled sales up 21.7% adjusted
- Membership income $1.355B, up 13.6% YoY (FX-adjusted 12.2%)
- Gross margin 11.02% (up 11 bps YoY, 1.0 bp excluding gas deflation); core-on-core margin up ~22 bps
🔮Future Guidance
- Capex for the year expected around $6.5B
- 34 net新 openings target: 28 for FY26, with 30+ openings per year long term
- Continued reinvestment in stores, depots, digital experience, and AI-enabled personalization
- No plan for a special dividend at this time; regular dividend and buybacks remain priorities
- Potential Middle East-related risks to fuel costs and shipping schedules; metrics to be monitored
💡Interesting Insights
- Costco’s creative real estate approach (e.g., parking decks, urban infill) could enable more harmonized 30+ openings/year while expanding in dense markets
Detailed Analysis
AI-generated summary of COSTCO WHOLESALE CORP earnings call transcript.
Costco’s Fiscal Q2 2026 reported $68.24B in net sales, up 9.1% year over year, and net income of $2.035B (+~14%), driven by stronger traffic, higher average ticket, and ongoing membership upgrades. Comparable sales rose 7.4% (6.7% ex gas/FX) with digitally-enabled sales up ~22% (adjusted ~21.7%), and membership income grew 13.6% (fx-adjusted 12.2%). The company expanded its member base to 82.1M paid members (up 4.8%), while executive memberships reached 40.4M (up 9.5%). Gross margins improved modestly (11.02% reported; core-on-core up 22 bps) despite higher rewards and mix shifts, aided by pricing actions and efficiency gains. Capex remained robust at $1.29B for the quarter, with full-year CapEx guidance of about $6.5B and plans for 28 net new warehouses in FY26 and 30+ openings per year longer-term. The February month showed continued healthy comp growth, aided by strong performance in food, fresh, and nonfood categories, though renewal rates and currency/geopolitical factors present ongoing risks. Management emphasized a strategic focus on real estate infill, enhanced digital experiences, and selective use of AI to improve member value and operating efficiency, with a cautious stance on potential Middle East-related cost volatility affecting fuel and shipping. Overall, the call conveyed a Bullish trajectory supported by accelerating digital engagement, expanding warehouse footprint, and disciplined pricing, with near-term risks largely absorbed by price leadership and efficiency programs.
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