8-K: Costco Reports Strong Q1 FY26 Earnings, Sales Up 8.2%

Costco Wholesale Corporation announced robust first quarter fiscal 2026 operating results, with net sales increasing 8.2% to $65.98 billion and diluted EPS rising to $4.50.

Summary

• Net sales for the first quarter of fiscal 2026 (twelve weeks ended November 23, 2025) increased 8.2% to $65.98 billion, up from $60.99 billion in the prior year.
• Comparable sales for the total company grew 6.4%, with adjusted comparable sales (excluding gasoline prices and foreign exchange impacts) also at 6.4%.
• U.S. comparable sales were 5.9% (5.9% adjusted), Canada 6.5% (9.0% adjusted), and Other International 8.8% (6.8% adjusted).
• Digitally-enabled comparable sales surged 20.5% (20.5% adjusted).
• Net income for the quarter was $2,001 million, or $4.50 per diluted share, compared to $1,798 million, or $4.04 per diluted share, last year.
• This year's results included a tax benefit of $72 million ($0.16 per diluted share) related to stock-based compensation, which was $100 million ($0.22 per diluted share) last year.
• Excluding these tax benefits, net income and diluted EPS growth were both 13.6%.
• Membership fees increased 14.0% to $1,329 million.
• Worldwide membership renewal rate stood at 89.7%, with the U.S./Canada rate at 92.2%.
• Paid memberships grew 5.2% to 81.4 million, and total cardholders increased 5.1% to 145.9 million.
• Costco currently operates 923 warehouses globally, with 2 new warehouses opened in Q1 FY26 (Mulhouse, France and Vancouver, BC Business Center).

Sentiment

Score: 8

Explanation: The company reported strong financial results across key metrics including net sales, comparable sales, net income, and EPS. Membership growth and renewal rates remain robust, and digital sales are accelerating. While capital expenditures are up, overall performance indicates healthy operational execution and market position, suggesting a very positive outlook.

Positives

• Net sales increased by a strong 8.2% to $65.98 billion, demonstrating robust top-line growth.
• Total company comparable sales grew 6.4%, indicating healthy underlying business performance across its operations.
• Digitally-enabled comparable sales showed significant growth of 20.5%, highlighting successful e-commerce strategies and increasing online penetration.
• Net income increased 11.3% to $2,001 million, and diluted EPS rose 11.4% to $4.50, reflecting strong profitability.
• Excluding the impact of stock-based compensation tax benefits, net income and diluted EPS growth were even stronger at 13.6%.
• Membership fee income increased 14.0% to $1,329 million, underscoring strong member loyalty and the effectiveness of the membership model.
• High worldwide membership renewal rate of 89.7% and 92.2% in the U.S./Canada indicates strong customer retention.
• Paid memberships increased 5.2% to 81.4 million, and total cardholders increased 5.1% to 145.9 million, showing continued membership expansion.
• Gross Margin improved by 4 basis points (bps) compared to Q1 FY25, both reported and excluding gas impact, indicating improved profitability per sale.
• Selling, General and Administrative (SG&A) expenses decreased by 1 bp as a percentage of sales, both reported and excluding gas impact, suggesting operational efficiency.
• Strong cash flow from operating activities, increasing to $4,688 million from $3,260 million in the prior year, provides financial flexibility.

Negatives

• The tax benefit related to stock-based compensation was lower this year ($72 million, $0.16 per diluted share) compared to last year ($100 million, $0.22 per diluted share), which slightly reduced reported net income growth.
• Additions to property and equipment increased to $1,526 million from $1,264 million, indicating higher capital expenditure for expansion and maintenance.

Risks

• Domestic and international economic conditions, including exchange rates, inflation or deflation.
• The effects of competition and regulation.
• Uncertainties in the financial markets.
• Consumer and small business spending patterns and debt levels.
• Breaches of security or privacy of member or business information.
• Conditions affecting the acquisition, development, ownership or use of real estate.
• Capital spending fluctuations.
• Actions of vendors.
• Rising costs associated with employees (generally including health-care costs and wages) and workforce interruptions.
• Energy and certain commodities price volatility.
• Geopolitical conditions, including tariffs.
• The ability to maintain effective internal control over financial reporting.
• Regulatory and other impacts related to environmental and social matters.
• Public-health related factors.

Future Outlook

The company expects to continue its global expansion, with an estimated 21 additional warehouses planned for opening during the remainder of fiscal year 2026, bringing the total to 942 warehouses by the end of FY26. Costco also plans to continue enhancing its digital capabilities through personalized product recommendations on its website, improved product display pages to increase conversion, and ongoing improvements to its search functionality.

Industry Context

The strong performance reported by Costco, particularly the robust growth in net sales, comparable sales, and digitally-enabled sales, indicates that the company is effectively navigating the competitive retail landscape. Its membership-based warehouse model continues to resonate with consumers, driving loyalty and consistent revenue streams, including a significant increase in membership fees. The continued global expansion and focus on digital enhancements suggest a proactive strategy to capture market share and adapt to evolving consumer shopping habits, potentially positioning Costco favorably against broader industry trends and competitors.

Stakeholder Impact

• Shareholders: Likely positive impact due to strong financial performance, increased net income, and diluted EPS, which could lead to increased shareholder value and potential for future returns.
• Customers (Members): Positive impact through continued value proposition, new product offerings, lowering everyday low prices, an expanding warehouse footprint, and improved digital shopping experience.
• Employees: Rising costs associated with employees (health-care costs and wages) are mentioned as a risk, which could imply potential for increased compensation or benefits, but also represents a cost pressure for the company.
• Suppliers/Vendors: Actions of vendors are listed as a risk, indicating ongoing relationships and potential impacts from supply chain dynamics and pricing negotiations.
• Creditors: Strong cash flow from operating activities and a healthy balance sheet position the company favorably, reducing credit risk.

Next Steps

• A conference call to discuss these results is scheduled for December 11, 2025, at 2:00 p.m. (PT).
• The company plans to open an estimated 21 additional warehouses during the remainder of fiscal year 2026, aiming for a total of 942 warehouses by year-end.
• Continued focus on digital enhancements, including personalized product recommendations, improved product display pages, and enhanced search capabilities.

Key Dates

Recommendation

Costco's Q1 FY26 results demonstrate exceptional performance across all critical metrics, including robust net sales growth of 8.2%, strong comparable sales (6.4% total, 20.5% digital), and double-digit increases in net income and EPS. The core membership model remains incredibly strong, evidenced by a 14.0% increase in membership fees and high renewal rates (89.7% worldwide, 92.2% US/Canada). The company's ability to expand gross margins while managing SG&A effectively, coupled with significant cash flow generation, underscores operational excellence. Continued strategic investments in warehouse expansion and digital enhancements position Costco for sustained growth. Despite general economic risks, Costco's value proposition and execution suggest it is well-positioned to outperform, making it a strong buy for long-term investors.

Keywords

Costco, COST, Earnings, Q1 Fiscal 2026, Retail, Wholesale, Membership, Sales Growth, E-commerce, Financial Results, Warehouse Expansion, Comparable Sales, Net Income, EPS