COST Q1 Deep Dive: Stable Growth, Membership Expansion, and Digital Investments Shape Outlook

Membership-only discount retailer Costco (NASDAQ:COST) reported revenue ahead of Wall Street’s expectations in Q1 CY2026, with sales up 9.2% year on year to $69.6 billion. Its non-GAAP profit of $4.58 per share was 0.7% above analysts’ consensus estimates.

Is now the time to buy COST? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Costco’s first quarter results reflected continued momentum across its core business, with management highlighting the effectiveness of new warehouse openings and ongoing digital enhancements as key drivers of performance. CEO Ron Vachris emphasized that price reductions on essentials such as eggs, cheese, and coffee contributed to traffic growth, while the company’s ability to manage tariff-related pressures supported overall sales consistency. The quarter also benefited from strong demand for fresh foods and premium nonfood categories, with management crediting “meaningful improvements in the speed of checkout” and targeted upgrades in the member experience for supporting both sales and productivity.

Looking forward, Costco’s management is focused on expanding its warehouse footprint, especially through creative real estate strategies to enter previously inaccessible markets. CFO Gary Millerchip noted plans for over 30 new global openings annually, underpinned by investments in technology and personalized digital experiences. Vachris pointed to enhancements in AI-driven personalization and automation as core elements of the company’s growth strategy, stating, “We believe our expertise in buying and limited SKU count model puts us in a position to manage shifts in tariffs as well as anyone.” Management acknowledged that external factors such as tariffs and global supply chain stability will continue to influence near-term results.

Key Insights from Management’s Remarks

Management attributed quarterly growth to product mix improvements, digital adoption, and membership upgrades, while emphasizing disciplined pricing and supply chain agility.

• Membership upgrades drive loyalty: Executive membership upgrades grew 9.5%, supported by digital incentives like monthly Instacart credits and extended warehouse hours, which management said increased both retention and spending.
• Digital enhancements boost efficiency: The rollout of mobile wallet, pharmacy pay ahead, and pre-scan technology improved checkout speeds, employee productivity, and the digital experience, with personalized product recommendations driving measurable e-commerce growth.
• Product mix and innovation: Expanded fresh foods (notably bakery and meat), premium nonfood offerings (such as jewelry and electronics), and seasonal launches helped drive higher average transaction values, with management citing success in both traditional and new items.
• Tariff management and pricing: Leadership maintained that agile sourcing, increased Kirkland Signature penetration, and shifting production locations allowed Costco to mitigate the impact of new global tariffs and selectively lower prices in key categories.
• International and real estate expansion: Ongoing warehouse growth, especially in Canada and Asia, benefited from creative real estate solutions, including urban infill with parking decks and mixed-use projects, supporting the goal of 30+ new openings per year.

Drivers of Future Performance

Costco’s outlook is anchored by continued warehouse expansion, investments in digital and operational efficiency, and ongoing management of external cost pressures.

• Warehouse pipeline and real estate: Management plans over 30 annual warehouse openings globally by leveraging creative real estate models, including multi-level urban sites, enabling entry into dense markets and supporting long-term growth.
• Digital and AI investments: Strategic enhancements in digital personalization, automation, and e-commerce are expected to raise member engagement and sales, with management emphasizing continued reinvestment of technology-driven efficiency gains into pricing and member value.
• Tariff and supply chain risks: The evolving global tariff environment and potential supply chain disruptions—especially from geopolitical events—present ongoing risks to cost management and pricing, with the company focused on flexibility in sourcing and inventory planning to offset these factors.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will watch for (1) progress on new warehouse openings and the effectiveness of urban real estate strategies, (2) measurable gains in digital sales and personalized member engagement resulting from technology investments, and (3) management’s ability to navigate changing tariffs and supply chain risks. Execution in international markets and membership retention will also be key indicators of sustained success.

Costco currently trades at $976.50, in line with $983 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).

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