Costco FY2026 net profit up nearly 14% to $9.2bn, targets 30 net new stores annually

September 24 — Global warehouse club operator Costco (Nasdaq: COST) released its financial results for the fourth quarter and full fiscal year ended August 30, 2026. The company's Q4 performance exceeded market expectations.

Fourth Quarter Highlights

• Total revenue: $95.723 billion, up 11.1% year-over-year
• Net sales: $93.873 billion, up 11.2% year-over-year
• Membership fee income: $1.85 billion, up 7.3% year-over-year
• Net income: $2.998 billion, up 14.9% year-over-year

Full Fiscal Year 2026 Highlights

• Total revenue: $303.154 billion, up 10.1% year-over-year
• Net sales: $297.247 billion, up 10.1% year-over-year
• Membership fee income: $5.907 billion, up 11% year-over-year
• Net income: $9.226 billion, up 13.9% year-over-year

Key Operational Metrics

During the Q4 earnings call, Costco Executive Vice President and CFO Gary Millerchip reported:

• Global comparable sales increased 9.4% year-over-year
• Global traffic (shopping frequency) rose 3.3% year-over-year
• Global average transaction value increased 5.9% year-over-year

Impact of Tariff Refunds

The company noted that Q4 results benefited from tariff-related refunds. Management disclosed during the call that Costco received $184 million in tariff refunds during the quarter, slightly more than one-third of the total expected refund amount. The company has also received a similar amount in the first quarter of fiscal 2027.

Management stated that most of the refunds will be used to enhance member value, including price reductions on various products. Costco aims to be the first retailer to lower prices whenever opportunities arise.

Supply Chain and Fuel Costs

Regarding supply chain and fuel price impacts, management noted that while the transportation team is addressing minor disruptions caused by recent typhoons in Asia and Panama Canal delays due to El Niño, overall product flow remains relatively smooth, and the procurement team is comfortable with inventory levels.

Due to rising fuel prices, Costco continues to closely monitor freight costs. The impact remains manageable, with new fuel surcharges largely offset by declining contract transportation rates.

Store Expansion: Targeting 30 Net New Stores Annually

As of the end of fiscal 2026, Costco operated 939 stores worldwide. President, CEO, and Director Ron Vachris reported that the company opened 12 new warehouses in Q4 and 28 in total during fiscal 2026.

Plans for fiscal 2027 include opening 33 new stores, 5 of which will be relocations. The company has also built a strong project pipeline for fiscal 2028 in Asia, Australia, and other international markets, with a long-term goal of adding approximately 30 net new warehouses annually.

"We continue to see significant new store growth opportunities, including entering new U.S. markets, densifying mature U.S. markets, and expanding in existing international markets," Vachris said, expressing confidence in the return on investment for all new store openings.

Asia vs. U.S. Market Dynamics

Gary Millerchip noted that compared to the U.S., warehouse clubs in Asian markets—including China, Japan, and South Korea—typically have higher membership counts per store but lower visit frequency. In contrast, U.S. stores have fewer members per location but significantly higher per-member spending.

If Costco opens 2–3 stores concentrated in Asia in a given year, membership growth rates may increase noticeably, but average per-member sales growth could be diluted.

China Market Strategy

A Costco China representative previously told The Paper that the company remains optimistic about the long-term potential of the Chinese mainland consumer market. Expansion pace is not driven by simply chasing store count or speed. The strategy favors densifying already validated mature markets.

Since entering the Chinese mainland market seven years ago, Costco has opened seven stores in Shanghai, Suzhou, Hangzhou, Ningbo, Nanjing, and Shenzhen. "We believe the Shenzhen market still has significant potential and needs a second and third store in the future. We are currently evaluating potential sites in Shenzhen and Guangzhou, but final decisions require further communication with local governments and other stakeholders."

The representative added that while consolidating existing markets, Costco will continue to assess additional promising regions. Expansion will proceed steadily when market conditions, locations, and teams are ready. For regions without physical stores, Costco will explore options through its JD.com partnership.

Membership Growth: Returning to Normal

Membership Fee Revenue

Q4 membership fee revenue increased by $125 million, or 7.3% year-over-year (7.7% excluding currency effects). Management noted that the recent U.S. and Canada membership fee increase contributed less than one percentage point to fee revenue growth. Excluding the fee increase and currency effects, Q4 membership fee revenue grew 6.8%, driven primarily by higher Executive Member penetration and growth in basic membership numbers.

Membership Metrics (End of Q4)

• Executive Members: 42.3 million, up 9.4% year-over-year
• Total paid members: 84.1 million, up 3.8% year-over-year
• Total cardholders: 150.4 million, up 3.6% year-over-year
• U.S. and Canada renewal rate: 92.3%, up 10 basis points from the previous quarter
• Global renewal rate: 89.8%, also up 10 basis points

Management Commentary

Management emphasized that membership remains Costco's most important "product." In fiscal 2026, Executive Member penetration reached an all-time high, and Q4 renewal rates improved again.

Since the pandemic, Costco's membership base under age 40 has grown nearly 60%, and members under 40 now account for more than one-quarter of all members. While younger members tend to spend less initially after signing up, they typically become higher-spending members over time.

Addressing Membership Growth Slowdown

When asked by an analyst about the slowdown in membership growth over approximately eight consecutive quarters, Gary Millerchip responded that new member registrations continue to grow. As younger, more digitally engaged members enter their renewal cycles, membership growth and overall renewal rates are returning to normal. Recent quarterly membership growth rates may be closer to the company's expected normal pace.

Management added that over the long term, higher Executive Member penetration will likely drive improved renewal rates and could accelerate overall membership growth. When Costco enters certain Asian markets and generates significant new member growth, it could serve as a catalyst for faster overall membership growth.

Source: The Paper