Costco's Digital Demand and Warehouse Strength Create a Dual Engine

Costco Wholesale Corporation COST has established a dual growth engine by leveraging its expanding digital capabilities and global warehouse network. This synergy was evident in the first quarter of fiscal 2026, when digitally enabled comparable sales advanced 20.5%. E-commerce site traffic rose 24%, while the average order value jumped 13%, reflecting expanding member engagement. We note that digitally enabled comparable sales accelerated further in January, surging 34.4% and contributing to the overall net sales growth of 9.3% for the retail month.

Complementing this digital penetration is the continued strength of the physical warehouse footprint. During the first quarter, Costco achieved a 3.1% increase in worldwide comparable traffic and a 3.2% rise in the comparable ticket size. Warehouse expansion further strengthens this dynamic. Management plans to open 28 net new warehouses during fiscal 2026 and aims for 30 or more annual openings in subsequent years.

Management noted that the success of new warehouse expansions has enabled the company to drive top-line growth well in excess of comparable sales. New warehouses opened in fiscal 2025 are generating an annualized $192 million in sales per location during the first year, a notable increase from the $150 million in sales recorded by new locations just two years prior.

The integration of technology is bridging the gap between digital and traditional shopping. Initiatives like the Costco Digital Wallet and pre-scanning technology are enhancing the member experience by increasing checkout productivity, with checkout speeds improving up to 20% in some locations. By focusing on providing a seamless experience across both platforms, Costco is effectively driving more items into baskets and increasing the frequency of member visits both online and in person.

Dual Growth Strategy: Dollar General & BJ’s Wholesale

The dual growth engine observed at Costco is also a priority for Dollar General Corporation DG and BJ's Wholesale Club Holdings, Inc. BJ. 

Dollar General is expanding its digital reach through partnerships with DoorDash and Uber Eats. This digital push at Dollar General is designed to complement its more than 20,000 brick-and-mortar stores, focusing on underserved rural communities. Through 4,730 planned real estate projects in fiscal 2026, Dollar General is pairing remodels and new stores with digital delivery and retail media initiatives to strengthen its value-driven competitive moat.

BJ’s Wholesale is driving growth through expanding digital adoption and disciplined warehouse expansion. In the third quarter of fiscal 2025, BJ’s Wholesale delivered 1.8% growth in comparable club sales, excluding gasoline sales, and a 30% jump in digitally enabled sales. BJ’s Wholesale has earlier unveiled its plans to open 25-30 new clubs over two years.

What the Latest Metrics Say About Costco

Costco has seen its shares up 18.1% year to date compared with the industry’s growth of 12.4%. 
 

From a valuation standpoint, Costco's forward 12-month price-to-earnings ratio stands at 48.4, higher than the industry’s ratio of 33.70. COST carries a Value Score of D. 
 

The Zacks Consensus Estimate for Costco’s current financial-year sales and earnings per share implies year-over-year growth of 8% and 12.2%, respectively. For the next fiscal year, the consensus estimate indicates a 7.1% rise in sales and 9.3% growth in earnings.
 

Costco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

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