ii view: digital sales carry Costco past Wall Street target

Fourth-quarter results to 30 August  

• Total revenues up 11.1% to $95.72 billion
• Adjusted comparable sales up 6.7% year over year
• Adjusted earnings up 12.4% to $6.60 per share

ii round-up:

Membership retailer Costco Wholesale Corp (NASDAQ:COST) detailed mixed fourth-quarter results, with sales and earnings beating analyst forecasts but paid membership fees falling marginally shy of estimates.

Total fourth-quarter revenues to late August rose 11.1% to $95.72 billion, driving growth in adjusted earnings of 12.4% to $6.60 per share. Analysts had expected outcomes of $94.86 billion and $6.53 per share respectively. Paid membership fees of $1.85 billion missed forecasts of $1.86 billion.

Shares in the S&P 500 retailer rose 2% in US trading having come into these latest figures up 4% so far in 2026. The S&P 500 index is up 12.5% year-to-date. Rival Walmart Inc (NASDAQ:WMT) is down 3%.

• Invest with ii: Buy US Stocks from UK | Most-traded US Stocks | Cashback Offers

Costco operates 939 warehouses globally including 647 in the US and Puerto Rico, 115 in Canada, 43 in Mexico, 29 in the UK, and seven in China.

Adjusted earnings of $6.60 excluded $0.15 per share of earnings relating to the returning of previously charged and subsequently outlawed trade tariffs taken by the Trump government.  

Digital sales improved 19.5%, aided by categories including pharmacy, home furnishings and small electrical items. Costco continues to expand its third-party same-day delivery channels in the US via partners DoorDash, Instacart and Uber.

Group revenue for the full year to late August rose 10.1% to $297.2 billion, fuelling adjusted earnings of $20.76 per share and up from the previous year’s $18.21.

Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the results, flagging a target price of $1,130.

ii view:

Opening its first warehouse in Seattle in 1983, Costco today serves nearly one-third of the US population. Headquartered in Issaquah, Washington on the West coast, the group’s former HQ in Kirkland remains the name of its own branded label. The S&P 500 and Nasdaq 100 company employs around 330,000 people globally.

For investors, concerns regarding pressured spending and its impact on slowing membership fee growth persist. A forecast price/earnings (PE) ratio above the 10-year average may suggest the shares are not obviously cheap. Ongoing trade talks between the US and China leave the threat of tariffs still lurking in the background, while the group’s e-commence operations lack the scale of rival Amazon.com Inc (NASDAQ:AMZN).

• New targets for S&P 500, earnings forecasts, rate hikes and AI
• Watch our webinar: Q4 Global Market Outlook
• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis

To the upside, diversity of revenue streams includes both product sales and membership fees, with the group’s geographical footprint also extensive. A US court ruling overturning Trump tariffs has seen Costco reclaim tariffs paid, with a likely reinvestment back into shelf prices. Store numbers are still growing, while initiatives to grow digital sales such as personalised product recommendations and improved search capabilities continue to assist.

In all, and despite ongoing risks, this well managed and value oriented retailer continues to justify its place in many already diversified investor portfolios.

Positives:

• Product diversity
• Value orientated

Negatives:

• Intense competition
• Subject to currency moves

The average rating of stock market analysts:

Buy