Costco Profit Tops Estimates, but Cautious Signals Curb Investor Enthusiasm

Costco Wholesale (COST) reported fiscal fourth-quarter results on Thursday, Sept. 24, that beat Wall Street's forecasts on earnings, revenue and same-store sales. The stock barely moved, rising 0.2% after hours. According to Bryan Hayes, an analyst at Zacks Investment Research, two details explain the caution: a one-time tariff refund that lifted profit, and a sharp slowdown in membership-fee growth.

The numbers

Costco earned $6.75 a share in the quarter, which ended Aug. 30, against analyst expectations of $6.54. That figure included 15 cents a share from tariff refunds. Without them, earnings would still have topped estimates, but by a narrower margin.

Revenue rose 11% from a year earlier to $95.72 billion, above the FactSet consensus of $94.97 billion. Same-store sales, which measure sales at established locations, rose 9.4%, ahead of the 9% analysts expected. Comparable-store traffic increased 3.3%, helped by price cuts on Costco's Kirkland Signature store brand.

Why investors held back

Membership fees are the core of Costco's profit model, because the company keeps prices on goods low and earns much of its margin from the annual fees members pay. That makes the growth rate of fee income a closely watched number.

In the fourth quarter, membership-fee income grew 7.3%, Hayes said. That compares with 14% growth in the same quarter last year, almost 14% over the first half of fiscal 2026, and 10.7% in the third quarter. Renewal rates, however, improved for a second straight quarter.

Valuation is the other constraint. "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." He added: "But at roughly 40 times forward earnings, Costco is priced for more than 'good.'"

The stock's recent record reflects that. Shares were up about 4% this year at around $898, below highs reached last year. Oppenheimer analysts noted the week before that Costco shares have fallen after seven of its last 10 earnings reports. Because Costco publishes sales figures every month, the quarterly report usually holds fewer surprises.

The tariff refunds across retail

Costco was the sixth large retailer this earnings season to book a profit boost from the Supreme Court's ruling this year against President Trump's emergency-powers tariffs, Hayes said. Walmart (WMT) recorded $2.9 billion in refunds, Target (TGT) $994 million, Home Depot (HD) $730 million, TJX (TJX) $331 million and Abercrombie & Fitch (ANF) about $100 million.

These refunds raise reported earnings for the quarter in which they are booked but do not recur, so analysts strip them out to judge underlying performance.

What it says about the consumer

Investors are watching Costco closely for signs of strain on U.S. households. Walmart raised concerns last month about deeper consumer stress, as higher gasoline prices and other costs limited spending. In May, Costco said demand at its gas stations had reached record levels, as shoppers looked for cheaper fuel amid the war in Iran.

Costco's executives described a consumer who is still spending selectively. They said higher memory-chip costs have pushed up electronics prices, but that sales gains came in categories such as jewelry, products tied to protein and fiber trends, and items like Kirkland matcha green-tea powder. "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 the earnings call.

Costco is also competing with Walmart on new fronts. Both now offer Medicare Advantage plans, and both are expanding delivery. In September, Costco and Uber Technologies (UBER) said they would extend delivery through Uber Eats to 47 states.

Monthly sales and membership fees

• Costco's monthly sales reports, the first read on the new fiscal year.
• Membership-fee growth in the next quarter, and whether it stabilizes after slowing to 7.3%.
• Renewal rates, which improved for two straight quarters.
• Whether earnings growth without tariff refunds supports a valuation of about 40 times forward earnings.