Costco Wholesale Corporation (NASDAQ: COST) reported fiscal fourth-quarter net income of $2.998 billion, or $6.75 per diluted share, up 15% from $2.610 billion in the year-ago period. This result exceeded the consensus estimate of $6.52 per share by 3.53%. Net sales for the quarter increased 11.1% to $95.723 billion, beating analyst expectations of roughly $94.859 billion.

The earnings beat was partly driven by a non-recurring benefit of $0.15 per diluted share from IEEPA tariff refunds received during the quarter, partially offset by reinvestment in member value. Excluding this item, operational performance remained robust, with comparable sales rising 9.4% total and 6.7% adjusted for gasoline and foreign exchange impacts. Membership fees grew 7.3% to $1.85 billion for the quarter, reflecting continued strength in high-margin recurring revenue.

Gas Business Drives Record Traffic and Member Savings

Higher gas prices across the U.S. have increased consumer frequency at Costco locations, with executives noting a record year for the gas business. CEO Ron Vachris stated that U.S. member households buying gas at Costco hit an all-time high in fiscal year 2026. The company estimates it saved members over $3.2 billion compared to average pump prices in markets where it operates.

CFO Gary Millerchip highlighted that gas was a major impact on top-line sales and noted that increased engagement with ancillary businesses like gas, pharmacy, and travel drives more frequent visits. Millerchip confirmed that many new members are buying gas for the first time, indicating continued spend growth. The company also received $184 million in tariff refund payments in the fourth quarter, which it intends to reinvest primarily into member value through price reductions on everyday items.

Inflationary Pressures and Margin Dynamics

Management noted that non-food inflation increased in the fourth quarter, driven by higher memory costs for consumer electronics and elevated prices for gas and petroleum-based products. Despite these headwinds, core-on-core margins rose 18 bps, excluding tariff refunds and reinvestments. Supply-chain efficiencies, higher labor productivity, and a favorable sales mix supported this margin expansion.

Reported gross margin fell 11 bps to 11.02% from 11.13%. However, excluding gas price inflation, gross margin increased 20 bps. The retailer also cited minor shipping disruptions from recent typhoons in Asia and El Niño-related delays at the Panama Canal.

Regional Performance and Digital Growth

Comparable sales growth was led by the U.S., which saw a 10.7% increase (7.2% adjusted). Canada followed with 5.0% (4.6% adjusted), while other international markets posted 7.0% (6.2% adjusted). The digital segment continued its strong trajectory, with digitally-enabled comparable sales surging 19.5% in the fourth quarter and 20.9% for the full fiscal year. Total digitally-enabled sales exceeded $33 billion for the fiscal year.

Site and app traffic rose 30% in the fourth quarter. Personalized sales increased by triple digits, with 10% of Costco.com orders including a personalized item. Traffic from AI-powered search platforms grew triple digits for the second consecutive quarter, producing the highest conversion rate among traffic sources.

Full Year Fiscal 2026 Highlights

For the full fiscal year ended August 30, 2026, Costco reported net sales of $297.2 billion, an increase of 10.1% from $269.9 billion in FY25. Total revenue, including membership fees, reached $303.2 billion. Annual net income climbed 13.9% to $9.226 billion, or $20.76 per diluted share, surpassing the full-year consensus estimate of $20.50.

The company ended the year with a fortified balance sheet, holding $20.2 billion in cash and cash equivalents, up from $14.2 billion a year prior. Long-term debt, excluding current portions, decreased to $3.9 billion from $5.7 billion, while current portions of long-term debt increased to $2.2 billion. Costco operates 939 warehouses globally, with 647 located in the United States and Puerto Rico.

Strategic Expansion and Capital Allocation

Management outlined an aggressive expansion plan for fiscal year 2027, targeting the opening of 33 new warehouses, including five relocations. This continues the company's goal of opening 30 net new warehouses per year. To support this growth and supply chain improvements, Costco plans a capital expenditure of approximately $7.5 billion in fiscal year 2027, up from $6.4 billion in fiscal year 2026. Capital expenditures totaled $2.21 billion in the fourth quarter alone.

Beyond fiscal 2027, the company expects capital expenditure growth to slow following three years of elevated investment that began in fiscal 2025. The expansion strategy includes new U.S. markets such as Buffalo, New York, and Lawrence, Kansas, alongside infills in mature markets and continued international growth. The company opened 12 warehouses during the quarter, including its 43rd warehouse in Mexico.

Membership Dynamics and Digital Partnerships

Membership metrics remain robust, with total paid members reaching 84.1 million, up 3.8% YoY, and cardholders at 150.4 million, up 3.6%. Executive Membership penetration reached an all-time high, with 42.3 million paid Executive Members, up 9.4%. Renewal rates improved slightly, with U.S. and Canada renewal rates at 92.3% and worldwide rates at 89.8%.

To capture younger demographics, Costco expanded its digital delivery partnerships. The Uber Eats partnership is growing from 17 states to the entire U.S., and the DoorDash partnership is expanding nationwide, complementing the existing Instacart agreement. Average delivery times across these platforms are under one hour, with most sales appearing incremental. Pharmacy sales climbed nearly 20% during the fiscal year, driven by GLP-1 drugs, fertility services, and pickup lockers.

What the Numbers Show

The divergence between headline EPS and adjusted performance highlights the impact of one-time items. While the $6.75 EPS represents a significant beat against the $6.52 consensus, $0.15 of this upside was attributable to tariff refunds. Investors should note that even excluding this benefit, the underlying earnings power remains strong, as evidenced by the 11.1% net sales growth and 9.4% comp sales increase. Furthermore, the digital channel's 19.5% growth rate significantly outpaces the overall company's 9.4% comp growth, indicating that e-commerce is becoming a disproportionate driver of top-line expansion relative to physical warehouse traffic. The planned $7.5 billion capex for FY27 signals confidence in long-term physical footprint expansion despite the rapid digital growth.

Additionally, the record performance of the gas business underscores a strategic dependency on macroeconomic factors beyond Costco's direct control. The $3.2 billion in member savings derived from gas pricing acts as a powerful retention tool, driving traffic frequency which likely supports the 10.7% U.S. comparable sales growth. However, the reliance on tariff refunds for part of the EPS beat introduces volatility; the $184 million received in Q4 represents only one-third of expected refunds, suggesting future quarters may face headwinds if refund inflows normalize without corresponding operational margin expansion.

Market Reaction and Peer Comparison

Prior to the release, shares had slumped 17% from their May high to close at $893.93, hitting an 8-month low amid macro uncertainty. In extended trading following the report, Costco stock was up 0.22% to $898.92. On Friday, shares traded higher, closing up 2.6% at $919.50, marking a 7.6% gain year-to-date. Analysts like Robert Drbul of BTIG had predicted net sales of $94 billion and EPS of $6.59, both of which were closely matched or exceeded by actuals. Oppenheimer maintained an Outperform rating with a $1,160 price target, citing healthy comp growth and steady traffic gains. The average consensus price target stands at $1,092, suggesting potential upside from recent levels despite the pre-earnings sell-off.

Despite the operational beat, Costco has underperformed its retail peers over the past year. The stock fell 4.96% over the last 12 months, trailing the peer-group average gain of 32.03% by 36.99 percentage points. It lagged behind Target (+77.51%), PriceSmart (+48.38%), Dollar Tree (+18.53%), Dollar General (+17.46%), and BJs Wholesale (-1.71%).

Technical Analysis

Costco is trading below all major trend gauges, sitting 1.6% under its 20-day SMA and 6.4% below its 200-day SMA, which keeps the longer-term bias pointed lower. The 20-day SMA is below the 50-day SMA, and the 50-day SMA remains below the 200-day SMA; a Death Cross that formed in August often signals that bounces may be corrective until price can reclaim those longer averages.

MACD is currently below its signal line and the histogram is negative, suggesting upside pressure is cooling versus the prior upswing. Key resistance sits at $978.50, near the overhead moving-average zone, while key support is at $874, near the lower end of the recent range where buyers previously stepped in.

A Costco executive confirmed that the company's traffic teams are actively working through minor shipping disruptions. These operational challenges stem from recent typhoons in Asia and ongoing delays in the Panama Canal attributed to El Nino weather patterns.

The statement was made during a conference call, highlighting the company's proactive approach to logistics management amidst global supply chain volatility. The executive noted that while these external factors have introduced friction, the impact remains minor and is being effectively mitigated by internal teams.

Logistics Challenges Cited

The disruptions identified by Costco are linked to specific geographic and climatic events:

• Asia Typhoons: Recent severe weather events in Asian regions have impacted shipping schedules.
• Panama Canal Delays: El Nino conditions have contributed to reduced capacity or slower transit times through this critical global trade route.

No further financial data or quantitative metrics regarding the extent of these delays were disclosed in the provided text.