Costco (COST) Q4 FY2026 Earnings: Core Margin Rises, Fee Growth Slows

Costco (COST) fiscal 2026 fourth-quarter earnings, released on September 24, 2026 in an 8-K earnings release and on the earnings call, covered the 16 weeks ended August 30, 2026 and gave partial answers to three open questions about the company [1][2]. On membership, the benefit of the last fee increase has ended and fee growth has returned to about 7%, while the member base remains stable. On gross margin, core merchandise margin rose year over year, and the decline in reported gross margin came mainly from sales mix and a year-end inventory accounting charge. On expansion, net new warehouse openings fell short of plan, and capital spending planned for fiscal 2027 is rising faster than openings. Taken together, growth now depends more on member spending, ancillary businesses and new warehouses; profit conversion held up; and cash flow must carry a larger investment program.

Costco runs membership warehouses and e-commerce sites that sell a limited range of branded and private-label goods to paying members at low prices [3]. Merchandise gross margin stays near 11% of net sales, and the annual membership fee, which carries almost no cost, contributes about half of operating income [3].

Core merchandise margin turned higher year over year

Costco's core-on-core gross margin, which measures core merchandise margin on core merchandise sales, rose 18 basis points year over year; in the fiscal third quarter the same measure had fallen 9 basis points [2][4]. The company's measure excludes tariff refunds and the price cuts funded by those refunds, and fresh foods, non-foods and foods and sundries all improved [2]. Management attributed the gain to supply chain efficiency, labor productivity in fresh, and stronger sales in higher-margin non-food departments [2].

Reported gross margin still fell 11 basis points to 11.02%, for two reasons [1][2]. First, lower-margin gasoline, e-commerce and pharmacy sales grew faster than core merchandise; excluding higher gasoline prices, gross margin rose 20 basis points [2]. Second, Costco recorded a one-time true-up of its full-year LIFO (last-in, first-out) inventory cost in the fourth quarter, a $152 million charge against $43 million a year earlier, driven mainly by memory chip costs and petroleum-related price increases [2].

Profit results point the same way. Net income was $2.998 billion, and excluding the net tariff refund benefit of $0.15 per diluted share it grew 12.3%, slightly faster than net sales growth of 11.2% [2]. The quarter shows core merchandise margin is not eroding, but it is only one quarter. If the refund-funded price cuts were counted in core merchandise, the improvement would be smaller, and the company has not disclosed that figure.

Membership fee growth slowed to about 7%

Membership fee income was $1.849 billion, up 7.3% year over year and 7.7% excluding foreign exchange, compared with 10.7% growth in the fiscal third quarter [2][5]. The company said the benefit from the September 2024 U.S. and Canada fee increase ended this quarter; excluding the increase and foreign exchange, fee income grew 6.8%, against 7.0% in the third quarter [2][5].

The member base remains stable. Paid members reached 84.1 million, up 3.8%; paid Executive members reached 42.3 million, up 9.4%; and the U.S. and Canada renewal rate was 92.3%, up 10 basis points from the prior quarter, which the company attributed to targeted digital communication and retention efforts [1][2]. Management said recent membership growth is closer to what it considers normal at this stage and gave no guidance [2].

Earlier double-digit fee growth came mainly from the price increase, and the underlying rate of about 7% did not deteriorate this quarter. Because membership fees contribute about half of operating income, slower fee growth reduces their contribution to profit growth.

Capital spending is growing faster than warehouse openings

In fiscal 2026 Costco opened 28 warehouses, including 3 relocations, for 25 net new locations and 939 warehouses at year end [1][2]. In the fiscal third quarter the company had expected 26 net new openings [6]. Full-year capital expenditure was $6.4 billion, close to the earlier plan of about $6.5 billion [2][7].

For fiscal 2027 the company plans 33 openings, including 5 relocations, and expects 967 warehouses at year end, or 28 net new, still below its goal of 30 a year [1][2]. It plans about $7.5 billion of capital expenditure, roughly 17% more than in fiscal 2026, and said the increase goes mainly to the new-warehouse pipeline and the supply chain [2]. Because spending is rising ahead of openings, it will absorb more free cash flow from fiscal 2027.

Digital growth has not yet shown signs of pulling traffic from warehouses. Digitally-enabled sales exceeded $33 billion for the year, up more than 20%, while company-wide shopping frequency still rose 3.3% [2]. Management said third-party delivery sales are mostly incremental but did not disclose how it measured that [2].

Conclusion

The report shows that the lift from Costco's fee increase has ended, and growth now relies on member spending, ancillary businesses and new warehouses. Profit conversion withstood sales-mix dilution and the inventory accounting charge, as higher core merchandise margin offset slower membership fee growth. Cash generation faces larger capital spending in fiscal 2027, and cash flow statement data for the period were not available. The next quarter should show whether core merchandise margin rises for a second quarter, whether underlying membership fee growth holds near 7%, and whether openings keep pace with capital spending.

Sources

[1] COST 8-K filed 2026-09-24, September 24, 2026, Costco 8-K filed with the SEC (Exhibit 99.1 press release and Exhibit 99.2 supplemental information), https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000909832&type=8-K

[2] COST Q4 FY2026 earnings call 2026-09-24, September 24, 2026, Costco fiscal 2026 fourth-quarter earnings call, https://investor.costco.com

[3] COST 10-K filed 2025-10-08, October 8, 2025, Costco fiscal 2025 Form 10-K, https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000909832&type=10-K

[4] COST Q3 FY2026 earnings call 2026-05-28 - margin, May 28, 2026, Costco fiscal 2026 third-quarter earnings call, https://investor.costco.com/news/news-details/2026/Costco-Wholesale-Corporation-Reports-Third-Quarter-and-Year-To-Date-Operating-Results-For-Fiscal-2026/default.aspx

[5] COST Q3 FY2026 earnings call 2026-05-28 - membership, May 28, 2026, Costco fiscal 2026 third-quarter earnings call, https://investor.costco.com/news/news-details/2026/Costco-Wholesale-Corporation-Reports-Third-Quarter-and-Year-To-Date-Operating-Results-For-Fiscal-2026/default.aspx

[6] COST Q3 FY2026 earnings call 2026-05-28 - warehouse program, May 28, 2026, Costco fiscal 2026 third-quarter earnings call, https://investor.costco.com/news/news-details/2026/Costco-Wholesale-Corporation-Reports-Third-Quarter-and-Year-To-Date-Operating-Results-For-Fiscal-2026/default.aspx

[7] COST 10-Q filed 2026-06-03 - Capital Expenditure Plans, June 3, 2026, Costco fiscal 2026 third-quarter Form 10-Q, https://www.sec.gov/Archives/edgar/data/909832/000090983226000051/cost-20260510.htm