ii view: growing membership boosts Costco results

Second-quarter results to 15 February  

• Total revenues up 9.2% to $69.6 billion
• Adjusted comparable sales up 6.7% year over year
• Adjusted earnings up 13.9% to $4.58 per share

ii round-up:

Big box retailer Costco Wholesale Corp (NASDAQ:COST) reported sales and profit that topped Wall Street forecasts, aided by ongoing growth in membership fee income. 

Total second-quarter revenues to mid-February rose 9.2% to $69.3 billion, fuelling growth in adjusted earnings of 13.9% to $4.58 per share. Analysts had expected outcomes of $69.3 billion and $4.56 per share respectively. Membership fees revenues climbed 13.6% to $1.36 billion.

Shares in the S&P 500 retailer rose almost 2% in US trading against the backdrop of an unfolding war in the Middle East. Shares came into these results up 14% so far in 2026, similar to rival Walmart Inc (NASDAQ:WMT). The S&P 500 index is down 0.2% year-to-date.

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Costco operates 924 warehouses globally including 634 in the USA, 114 in Canada, 42 in Mexico, 29 in the UK and seven in China. 

Digital sales climbed 22.6%, aided by categories including toys, small electricals and pharmacy items. Online initiatives have included personalised product recommendations and ongoing improvements to search capabilities.

Costco continues to plan for a further 15 outlets across the US in this current financial year and three new stores overseas. 

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 employs more than 330,000 people globally. The retailer serves almost one-third of the US population. Headquartered in Issaquah, Washington on the west coast, Costco’s former HQ in Kirkland remains the name of its own branded label. 

Geographically, the US remains its biggest sales generator during its last financial year at 72%. The balance was split almost equally between Canada and other international stores. 

For investors, trade tariffs being applied on goods imported from overseas such as toys have pressured product shelf prices. An unfolding war in the Middle East and rising energy prices may pressure inflation, impacting interest rates. A forecast price/earnings (PE) ratio above the 10-year average may suggest the shares are not obviously cheap, while ongoing trade talks between the US and China could yet impact.

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On the upside, diversity of revenue streams includes both membership fees and product sales, and with the group’s geographical footprint also extensive. A US court ruling overturning Trump tariffs could see retailers such as Costco attempting to reclaim tariffs paid. Store numbers continue to be expanded, while initiatives to assist digital related sales appear to be impacting.

For now, and despite ongoing risks, this value retailer continues to remain worthy of 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