Retailer delivers fourth-quarter profit beat as investors pay close attention to pressures on U.S. consumers
Costco reported quarterly results on Thursday.
Costco's fourth-quarter results beat expectations on Thursday. But how the retailer got there appeared to give some analysts and investors pause.
Bryan Hayes, an analyst at Zacks Investment Research, said the apprehension came down mainly to two things: A tariff refund that fueled profits, and a slowdown in membership-fee growth.
Costco (COST) earned $6.75 a share, beating expectations for $6.54. But the bottom-line figure included 15 cents' per share worth of tariff refunds. Factor out those refunds, and Costco's results still would have topped Wall Street's estimates - albeit by a narrower margin.
However, Hayes said, Costco's membership fee income grew 7.3%. That's a slowdown from 14% in last year's fourth quarter, almost 14% over the first half of Costco's fiscal 2026, and 10.7% in the retailer's third quarter, he said.
Still, he pointed to higher membership renewal rates. And as Wall Street looks for ways to gauge the health of an increasingly stretched consumer, Costco's comparable-store traffic was up 3.3%, helped by price cuts to its Kirkland Signature store brand.
"This was a good quarter from an exceptionally well-run company," Hayes said. "Traffic grew, renewal rates improved for a second straight quarter, core margins expanded and the store-opening pace is accelerating."
"But at roughly 40 times forward earnings, Costco is priced for more than 'good,'" he said.
Investors' reaction to the results on Thursday was muted. Shares of Costco were up 0.2% after hours. The stock is up around 4% so far this year, and trading at around $898. However, shares are off highs reached last year.
Oppenheimer analysts last week noted that shares of Costco have fallen after seven out of the past 10 earnings reports. Moreover, since the retailer reports monthly sales results, there are fewer surprises for investors come earnings season. Costco's fourth quarter ended on Aug. 30.
The chain reported the results at a time when investors are paying close attention to the pressure on U.S. consumers. Rival Walmart (WMT) last month sparked concerns about deeper consumer stresses, as higher gas prices and other costs constrained spending. Costco in May said demand at its gas stations had reached record levels, as people sought cheaper alternatives and ways to stay ahead of future spikes in oil prices due to the Iran war.
During its earnings call on Thursday, Costco executives noted gains in things like jewelry, items geared toward the protein and fiber crazes, and things like Kirkland Japanese matcha green-tea powder. The company also confirmed rumors that its food-court churro would be returning to U.S. locations this month for a limited time.
While executives said that the higher cost of memory chips had driven up prices for electronics, they said shoppers were still hanging in there.
"They continue to show a willingness to spend on discretionary items where they see that there's exciting new items that are offering great value to them," Chief Financial Officer Gary Millerchip said on Costco's earnings call.
The retail giant reported fourth-quarter revenue of $95.72 billion, an 11% year-over year gain and above FactSet forecasts for $94.97 billion. Same-store sales, or those made at established stores, rose 9.4% during the period, topping estimates for a 9% increase.
Costco and Walmart are competing in other ways. Both are offering Medicare Advantage plans, and both are trying to expand their delivery networks. Costco and Uber Technologies (UBER) this month said they would expand delivery service via Uber Eats to 47 states.
Hayes, the Zacks analyst, noted that Costco was the sixth big retailer over this earnings season whose profits got a lift from the Supreme Court's ruling against President Donald Trump's emergency-powers tariffs this year.
Walmart, he said, recorded $2.9 billion, while Target (TGT) booked $994 million, he said. Home Depot (HD) booked $730 million, TJX Cos. $(TJX)$ $331 million, and Abercrombie & Fitch $(ANF)$ had around $100 million.
-Bill Peters