Costco Beats Q1 Earnings Estimates With 6.4% Comparable Sales Growth

Costco Wholesale Corporation COST reported first-quarter fiscal 2026 results, wherein the top line fell short of the Zacks Consensus Estimate, while the bottom line beat the same. Nonetheless, both revenues and earnings improved year over year, driven by robust membership growth, resilient traffic, double-digit e-commerce gains and margin expansion.

Costco’s Quarterly Performance: Key Metrics and Insights

Costco posted quarterly earnings of $4.34 per share, which excludes a 16-cent tax benefit, and surpassed the Zacks Consensus Estimate of $4.26. This compared favorably with the prior-year period’s earnings of $3.82 per share, which excludes a 22-cent tax benefit related to stock-based compensation. Including the tax benefit, quarterly earnings came in at $4.50, up from $4.04 per share reported in the prior-year period.

Total revenues, comprising net sales and membership fees, reached $67,307 million, up 8.3% from the year-ago quarter. However, the figure came just shy of the Zacks Consensus Estimate of $67,326 million. Momentum was driven by healthy traffic trends, continued strength in international markets and strong digitally enabled sales. E-commerce remained a standout contributor, helped by better personalization tools and improved app functionality.

Costco’s comparable sales rose 6.4% year over year in the quarter. Comparable sales in the United States grew 5.9%, while Canada and Other International markets saw increases of 6.5% and 8.8%, respectively. Digitally enabled comparable sales surged 20.5%, supported by solid performance across categories such as pharmacy, jewelry, tires, small electrics, apparel and majors.

Costco’s strategic investments, customer-centric approach and merchandise initiatives, along with an emphasis on membership growth, have helped it capture market share and maintain steady revenue growth. By prioritizing value and quality, the company has built strong customer loyalty, leading to an impressive membership renewal rate of 92.2% in the United States and Canada and 89.7% worldwide in the quarter.

Costco Wholesale Corporation Price, Consensus and EPS Surprise

Costco Wholesale Corporation price-consensus-eps-surprise-chart | Costco Wholesale Corporation Quote

Costco Achieves Membership Growth and Improved Margins

Net sales climbed 8.2% year over year to $65,978 million, while membership fees jumped 14% to $1,329 million, benefiting from strong renewal rates and the annualized benefit of the recent membership fee increase. Excluding the membership fee increase and FX, membership income jumped 7.3% year over year. Costco ended the quarter with 81.4 million paid household members, up 5.2% from the year-ago period, and total cardholders grew 5.1% to 145.9 million. Executive memberships increased 9.1% to 39.7 million.

Traffic improved 3.1% worldwide and 2.6% in the United States, while the average transaction or ticket increased 3.2% both globally and in the United States. Excluding the effects of gasoline price changes and foreign exchange, total comparable sales rose 6.4%, with the United States up 5.9%, Canada up 9% and Other International gaining 6.8%.

Gross margin expanded 4 basis points year over year to 11.3%, driven by efficiencies in fresh foods, better inventory execution, higher Kirkland Signature penetration and strength in ancillary businesses. The operating income grew 12.2% to $2,463 million, while the operating margin improved 20 basis points to 3.7%.

Costco's Store Updates and Expansion Plans

Costco currently operates 923 warehouses. These include 633 in the United States and Puerto Rico, 114 in Canada, 42 in Mexico, 37 in Japan, 29 in the United Kingdom, 20 in Korea, 15 in Australia, 14 in Taiwan, seven in China, five in Spain, three in France, two in Sweden and one each in Iceland and New Zealand.

During the quarter under discussion, Costco opened eight new warehouses, including a relocation in Canada, a third warehouse in France, four net new U.S. locations and two additional Canadian business centers. During fiscal 2026, the company plans to add 28 net new warehouses.

Costco’s Financial Health Snapshot

Costco ended the quarter with $16,217 million in cash and cash equivalents. Long-term debt, excluding the current portion, stood at $5,666 million, while shareholders’ equity totaled $30,303 million. 

Operating cash flow increased meaningfully to $4,688 million for the 12 weeks ended Nov. 23, up from $3,260 million in the year-ago period. Capital expenditures were $1.53 billion for the quarter, consistent with plans to invest in warehouse openings, logistics, technology enhancements and member-experience improvements. Costco expects fiscal 2026 capital expenditures to be approximately $6.5 billion.

Shares of this Zacks Rank #3 (Hold) company have fallen 3.5% year to date against the industry’s rise of 5.3%.

Stocks to Consider

United Natural Foods, Inc. UNFI, North America’s premier grocery wholesaler, currently sports a Zacks Rank #1 (Strong Buy). UNFI has a trailing four-quarter earnings surprise of 52.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for United Natural Foods’ current financial-year sales and EPS calls for growth of 1% and 187.3%, respectively, from the year-ago reported numbers.

Boot Barn Holdings, Inc. BOOT, the nation’s leading lifestyle retailer of western and work-related footwear, apparel and accessories, currently carries a Zacks Rank #2 (Buy). BOOT has a trailing four-quarter earnings surprise of 5.4%, on average. 

The Zacks Consensus Estimate for Boot Barn’s current financial-year sales and EPS implies growth of 16.2% and 20.5%, respectively, from the year-ago reported numbers.

Dollar Tree, Inc. DLTR, one of North America’s largest value retailers, currently carries a Zacks Rank #2. DLTR has a trailing four-quarter earnings surprise of 29.1%, on average. 

The Zacks Consensus Estimate for Dollar Tree’s current financial-year EPS suggests growth of 11.8% from the year-ago reported numbers.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research