COST — Costco Wholesale Corporation

Costco Wholesale Corporation (COST) Q3 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Net Income: $2.19 billion, or $4.93 per diluted share, up 15% from $1.9 billion ($4.28 per share) in Q3 2025.
• Net Sales: $69.2 billion, an increase of 11.6% from $62 billion in Q3 2025.
• Comparable Sales: Up 9.8%, with a 6.6% increase when adjusted for gas price inflation and foreign exchange (FX).
• Membership Fee Income: $1.37 billion, up 10.7% year-over-year.
• Membership Base: 82.9 million total paid members, a 4.1% increase year-over-year, with 41.2 million executive memberships, up 9.6%.
• Gross Margin: 11.04%, down 21 basis points year-over-year; core margins were lower due to price investments in key items like eggs and beef.
• SG&A Rate: Improved by 20 basis points to 8.96%.

2. Strategic Updates and Business Highlights

• Gas Business: Record-breaking sales volumes due to high consumer price sensitivity and geopolitical factors affecting supply. The gas segment saw a significant increase in traffic and member loyalty.
• Warehouse Openings: Opened 4 new warehouses (3 in the U.S., 1 in Canada), totaling 928 worldwide. Aiming for 30+ net new openings annually.
• Digital Enhancements: Significant improvements in e-commerce, including same-day delivery services in Spain and France, and enhancements to the mobile wallet and digital membership card.
• AI Integration: Leveraging AI to improve product visibility and member engagement, with early positive results in traffic and conversion rates.

3. Forward Guidance and Outlook

• Costco does not provide specific guidance but remains optimistic about continued growth in membership and sales. The company is focused on maintaining its value proposition amidst inflationary pressures and competitive dynamics.
• The company is monitoring inflation impacts and expects to adapt pricing strategies accordingly.

4. Bad News, Challenges, or Points of Concern

• Membership Growth: The growth rate of paid memberships slowed to 4.1%, which is the lowest in some time. This raises concerns about future same-store sales growth.
• Gross Margin Pressure: Margins were impacted by strategic price reductions to maintain competitiveness and member loyalty, particularly in fresh food categories.
• Inflationary Pressures: Higher costs in non-food categories are anticipated, particularly due to rising resin costs and other supply chain challenges.
• Competitive Landscape: Increased competition from major players like Walmart and Amazon, particularly in delivery speed and service offerings.

5. Notable Q&A Insights

• Membership Dynamics: The CFO noted that both upgrades from gold to executive memberships and new executive sign-ups are contributing to membership growth.
• Traffic Trends: Traffic growth was slightly below historical trends, attributed to various factors including calendar shifts and economic conditions. However, gas station visits are driving increased member engagement.
• Pricing Strategy: Costco aims to be the first to lower prices and the last to raise them, with recent price reductions on several Kirkland Signature items.
• Retail Media and AI: The company is focusing on enhancing member experience through personalized marketing and retail media partnerships, emphasizing that member satisfaction remains the priority.

Overall, Costco reported strong financial performance but faces challenges related to membership growth and competitive pressures, while continuing to invest in strategic initiatives to enhance member value and operational efficiency.