Costco Wholesale Corporation Q2 FY2026 earnings call

Ron discussed tariffs, noting future impact is fluid, buyers managing tariffs, IEPA tariff refunds unclear, and strategies like moving production, consolidating buying, leaning on Kirkland Signature, and sourcing domestically. Growth priorities include increasing warehouse pipeline with 28 net new openings in fiscal year 26 and targeting 30+ new openings per year. Digital strides include mobile wallet enhancements, pharmacy pay ahead, employee pre-scan technology, automated pay stations, and personalized digital capabilities. Merchandising highlights include Lunar New Year and Valentine's Day successes, fresh and non-food comp sales growth, Kirkland Signature launches, and ancillary business growth.

Net income for the second quarter was $2.035 billion, or $4.58 per diluted share, up nearly 14% from the prior year. Net sales were $68.24 billion, up 9.1% year over year. Comparable sales were up 7.4% or 6.7% adjusted for gas price deflation and foreign exchange. Membership fee income was $1.355 billion, up 13.6% year over year. Gross margin rate was 11.02%, up 17 basis points year over year. SG&A rate was 9.19%, up 13 basis points year over year. Comparable sales by segment: US up 5.2% or 6% adjusted for gas deflation and FX, Canada up 12.8% or 9.3% adjusted for gas deflation and FX, other international up 17.9% or 10.9% adjusted for gas deflation and FX. Digitally enabled sales were up 22.6% or 21.7% adjusted for FX.

Expect 28 net new warehouse openings in fiscal year 26 and target 30+ new openings per year in coming years. Announce March sales results on April 8th after market close.

Future impact of tariffs remains fluid; complexity of tariffs makes tracking exact impact challenging. Situation in the Middle East could impact fuel costs and shipping schedules if unstable for sustained period. Renewal rate of new online members slightly lower; need to focus on increasing their renewal rate.

Q: Near-term weather impact and gold impact on business.

A: Weather created volatility but no major impact on total sales; members focused on quality and value, results consistent.

Q: Innovations' savings and reinvestment.

A: Digital enhancements beneficial, see tailwinds, continue to reinvest.

Q: Assortment changes and gas crossover traffic.

A: Going back to traditional assortment, see about half of gas station shoppers cross shop at warehouse.

Q: Competitive openings and LLM.

A: No negative membership impact from competitors, want Costco to surface with partners.

Q: Canada AUV, international pipeline.

A: Canada has high volume per location, look forward to growth in international markets.

Q: Real estate opportunities.

A: Being creative with real estate models to enter inner cities, confident in 30 warehouse a year goal.

Q: Core-on-core margins and back half.

A: Gross margin pleased, core-on-core up 22 basis points, various factors contributing.

Q: Membership growth dynamics.

A: Less new warehouse openings in new markets, cycling strong signups, long-term growth rate around 5%.

Q: Renewal rates.

A: Global rate flat, US rate down 10 basis points, working on retention strategies.

Q: Inflation.

A: Inflation less this quarter, fresh and food and sundries drove lower inflation, some areas still inflationary.

Q: Digital advertising, marketplace, AI.

A: Retail media early innings, focus on personalization, AI for member and employee value.

Q: Special dividend.

A: No current plans for special dividend, review with board.

Q: Pharmacy and media.

A: Pharmacy growing, media has meaningful dollars, focus on member value.

Q: International expansion in China.

A: China growing nicely, follow customary growth pattern