Costco Beats Q4 Estimates, Passes Tariff Refunds to Members

Costco Wholesale beat Wall Street’s forecasts for its fiscal fourth quarter on 24 September. Digital sales were strong and membership kept growing, and the warehouse retailer also got a one-time lift from US tariff refunds, most of which it says went back to shoppers as lower prices.

In the 16 weeks to 30 August, net sales climbed 11.2% to $93.9 billion, against $84.4 billion a year ago. Add membership fees and total revenue came to $95.7 billion. Profit was $2.998 billion, or $6.75 a share, compared with $5.87 last year; analysts had pencilled in roughly $6.52–6.55 a share and about $94.9 billion in revenue.

The tariff refund effect

Refunds of tariffs charged under the International Emergency Economic Powers Act (IEEPA) added a one-off $0.15 a share. On the earnings call, Costco said it had received $184 million in refunds, made up of $174 million in duties and $10 million in interest, or about a third of the total it expects. It said most of that money went back to customers through lower prices.

Chief financial officer Gary Millerchip said the retailer’s goal was “to be the first to lower prices”, according to a Yahoo Finance account of the call.

The company’s LIFO (last in, first out) inventory charge of slightly above $200 million implies inflation of about 1.5% in its US inventory, a far smaller increase than many shoppers are seeing at the fuel pump.

Sales momentum across regions

Comparable sales rose 9.4% in the quarter, or 6.7% excluding the impact of petrol prices and currency movements. US comparable sales grew 10.7%, or 7.2% on an adjusted basis. Canada recorded 5.0% growth (4.6% adjusted), while other international markets rose 7.0% (6.2% adjusted). Digitally enabled comparable sales surged 19.5%.

For the full fiscal year, net sales rose 10.1% to $297.2 billion and total revenue reached $303.2 billion. Net income totalled $9.226 billion, or $20.76 per share, compared with $18.21 the year before. Digital sales exceeded $33 billion, an increase of more than 20%.

Membership engine keeps running

Membership fee income, the bedrock of Costco’s profits, grew to $1.85 billion in the quarter and $5.91 billion for the year, from $5.32 billion. Paid members rose 3.8% to 84.1 million, while executive members, who pay a higher fee, increased 9.4% to 42.3 million. The renewal rate was 92.3% in the US and Canada and 89.8% worldwide.

Costco ended the year with 939 warehouses after opening 28 during fiscal 2026. It plans 33 openings in fiscal 2027, with capital expenditure expected to rise to about $7.5 billion from $6.4 billion. Chief executive Ron Vachris sounded upbeat on holiday merchandise.

Membership fees are such a large part of the business that investors watch renewal rates closely. The $5.91 billion collected in fiscal 2026 was equivalent to nearly two-thirds of the company’s $9.226 billion net profit. Because fees are collected upfront and renew at rates close to 90%, they give Costco a predictable earnings base that lets it keep merchandise margins thin, which in turn attracts more members.

How analysts responded

Brokerages largely stayed positive while trimming some targets after a strong run in the shares. Mizuho lowered its price target to $1,065 from $1,100, and Bernstein edged its target down to $1,143 from $1,144, according to Benzinga. DA Davidson raised its target to $1,040 from $1,000. The stock swung between losses in pre-market trade and gains later in Friday’s session as investors weighed the one-off tariff benefit against underlying growth.

Why it matters

Costco’s results offer a useful read on the American consumer at a time when sentiment surveys are near historic lows and fuel prices are high. The numbers suggest value-focused chains are winning share as households trade down and consolidate shopping trips. The CFO described members as “very resilient”.

The tariff refunds also show how US trade policy is feeding through to corporate earnings. Retailers that pass refunds on to customers, as Costco has, could take market share from rivals that keep the windfall.

For Indian exporters, strong US retail volumes are a positive signal. Large American retailers source food products, home textiles and household goods from India, and sustained growth in warehouse-club traffic supports order books for those suppliers.

What happens next

Costco reports monthly sales, with September figures due in early October, offering an early look at the new fiscal year. Investors will watch whether comparable sales hold up once the tariff boost fades, how quickly the remaining refunds arrive, and whether rising US interest rates start to weigh on big-ticket discretionary purchases during the holiday season.