Costco closed fiscal 2026 with a clean but narrow beat. Excluding a one-time tariff-refund benefit, fiscal fourth-quarter earnings were $6.60 per share. That topped the $6.48 consensus by 0.9% and edged past the $6.54 Earnings Whisper number. Revenue of $95.723 billion beat the $94.78 billion estimate by 1.0% and grew 11.1% year over year. Earnings grew 12.4%, a respectable pace but a deceleration from roughly 15% in the third quarter. That is the central tension of the quarter. Costco's merchandising engine is strengthening at the margin line, while the growth metrics that justify a premium multiple, paid members and digital sales, keep cooling.
The quality of the beat deserves some scrutiny. GAAP diluted EPS was $6.75, including a $0.15 non-recurring benefit from IEEPA tariff refunds, net of partial reinvestment in member pricing. The $6.60 figure strips that out, so the beat over the whisper number was only a few cents. The headline 9.4% total comp was flattered by gasoline, with gas comps up in the mid-30s on record volumes. On an adjusted basis, excluding gas and foreign exchange, comps were 6.7%. That was essentially identical to 6.6% in Q3, 6.7% in Q2 and 6.4% in Q1, a remarkably steady run that shows neither acceleration nor erosion. Below the line, the year was solid. Fiscal 2026 operating cash flow rose to $15.8 billion from $13.3 billion, and cash ended at $20.2 billion.
The more encouraging story is margins and traffic. Core-on-core margin, excluding tariffs, swung back to +18 basis points from -9 basis points in Q3. Gross margin excluding gas improved 20 basis points versus just 1 basis point in Q3, and SG&A levered modestly. Traffic accelerated to +3.3% from +2.4%. Renewal rates ticked up to 92.3% in the U.S. and Canada and 89.8% worldwide, and executive penetration hit a record. That margin rebound came despite a LIFO charge of $152 million, up from $43 million a year ago, driven by memory-chip costs in electronics and Middle East-related petroleum and resin inflation. Absorbing that while expanding core margins is a genuine operating achievement.
The weaker threads are harder to dismiss.
- **Paid members:** Paid member growth slowed to 3.8%, from 5.2% in Q1, an eighth straight quarter of deceleration that management framed as the new normal.
- **Membership fees:** Fee income excluding the fee increase grew 6.8%, versus 7.5% in Q2. This was the last quarter lapping the fee hike, so headline fee growth loses about a point of tailwind going forward.
- **Digital:** Digitally enabled comps cooled to 19.5% from 22.6% two quarters ago, and site and app traffic growth slowed to 30% from 37%.
- **Store openings:** Fiscal 2026 net openings of 25 fell short of the 28 once targeted.
- **Monthly sales:** An analyst noted that monthly sales moderated slightly even with roughly $100 million of refund money reinvested in price.
Looking forward, the catalysts are real but come with higher spending. Costco plans 33 openings in fiscal 2027, about 28 net, including four in Europe. It has budgeted capex of about $7.5 billion, up from roughly $6.4 billion. Tariff refunds should continue, with about one-third of the expected total received in Q4 and a similar amount already collected in Q1 of fiscal 2027. Management intends to reinvest most of that in price, so bulls should not model it as incremental profit. Other developments include nationwide Uber Eats and DoorDash delivery, a ScanHealth Medicare Advantage partnership, and triple-digit growth in AI-search referral traffic. Members under 40 now make up more than a quarter of the base. Offsetting risks include GLP-1 and Medicare pricing headwinds in pharmacy, fuel-driven freight costs, and a murky inflation outlook tied to the Middle East and tariffs.
The market setup is more complicated than the surprise implies. Heading into the report, shares traded at $904.70, down 8.3% from the $986.57 open after the May report. The stock sat 5.8% below its 200-day moving average and just 2.2% above the inter-earnings low of $885.50, set only days before the release. The quarter's high of $998.82 was set the day after the prior report, so the stock has spent the entire period grinding lower. Investor sentiment deteriorated further, from -0.20 to -0.33. That is a meaningful but not extreme move deeper into negative territory. Earnings Whispers price and AVWAP trends remain negative, while sequential growth and momentum are neutral.
The bottom line is that Costco delivered what it usually delivers: steady 6-7% underlying comps, better traffic, firmer renewals, and a notable rebound in core margins despite inflation pressure. That is enough to defend the operating story. However, the modest beat, decelerating EPS growth, eighth straight quarter of slower member growth, cooling digital momentum and a heavier capex plan give bears legitimate ammunition. With shares near their lows and sentiment souring, investors will likely need evidence that member growth is stabilizing before rewarding Costco's margin improvement.