COSTCO WHOLESALE CORP /NEW (COST) Pre-Earnings Brief

Q1: Will comparable sales growth, excluding gas and FX impacts, exceed 6.5% for the quarter?

Why it matters: This is a core indicator of underlying organic demand and member traffic strength at existing warehouses, directly supporting the investment thesis of resilient consumer spending and market share gains in a competitive retail environment.

Bull answer: Yes, comps came in at 7% or higher, with strong traffic and ticket growth across U.S. and international markets, signaling continued momentum.

Bear answer: No, comps were below 6%, with softening traffic or average ticket size, raising concerns about demand slowdown.

Q2: Did membership fee revenue surpass $1.40 billion, and what was the contribution from the recent fee increase?

Why it matters: Membership fees represent high-margin, recurring revenue (nearly pure profit) that funds investments and provides stability; consistent growth validates the moat and pricing power central to Costco's long-term thesis.

Bull answer: Yes, fees exceeded $1.40B with healthy underlying growth from new members and executive upgrades beyond the fee hike impact.

Bear answer: No, fees fell short of $1.40B or showed minimal growth ex-fee hike, indicating potential member pushback or slower additions.

Q3: Has the U.S. and Canada membership renewal rate remained above 92%?

Why it matters: High renewal rates demonstrate exceptional member loyalty and value perception, a key differentiator that underpins predictable revenue streams and supports the defensive growth narrative in the investment thesis.

Bull answer: Yes, renewal held steady or improved above 92%, with strong executive membership upgrades continuing.

Bear answer: No, renewal dropped noticeably below 92%, suggesting erosion in member satisfaction post-fee adjustments.

Q4: Will digitally-enabled comparable sales growth exceed 20% year-over-year?

Why it matters: E-commerce and digital sales represent a high-growth channel that enhances member engagement and expands addressable market; accelerating digital performance is critical for sustaining overall revenue growth amid physical store maturation.

Bull answer: Yes, digital comps grew 22%+, driven by app improvements, same-day delivery, and higher online penetration.

Bear answer: No, digital growth slowed below 20%, indicating challenges in scaling online operations or competition from pure-play e-tailers.

Q5: Did diluted EPS beat $4.80, with operating margin expansion?

Why it matters: EPS growth, combined with margin trends, reflects operational efficiency, leverage from sales growth, and cost control—key to validating the profitability expansion expected in the long-term investment thesis beyond just top-line revenue.

Bull answer: Yes, EPS significantly beat $4.80 with gross and operating margin expansion from better merchandise margins and SG&A leverage.

Bear answer: No, EPS missed or only slightly beat with flat or contracting margins due to higher wages or SG&A pressures.

Q6: Are new warehouse openings on track for at least 25-28 net additions in FY2026, with positive contribution to sales?

Why it matters: Square footage growth via new warehouses drives incremental revenue and membership; meeting or exceeding expansion targets reinforces the scalable model and long-term growth runway in the investment case.

Bull answer: Yes, openings are on pace or ahead, with new locations contributing strongly to comps and membership sign-ups.

Bear answer: No, openings lagged below 25 net adds or new stores underperformed on sales ramp, signaling execution or site selection issues.