COSTCO WHOLESALE CORP /NEW Q4 FY2026 earnings call

• Warehouse Expansion: Opened 12 warehouses in Q4 (including 10 new U.S. buildings and the 43rd in Mexico), bringing the total to 939 worldwide. Planning to open 33 warehouses in FY2027 (targeting 30 net new openings annually).
• Digital Growth: Digitally enabled sales exceeded $33 billion, up over 20%. Expanded partnerships with Uber Eats (nationwide) and DoorDash, complementing Instacart. AI search traffic grew triple-digits.
• Membership Strength: Executive membership penetration reached an all-time high. Total paid members grew 3.8% to 84.1 million. U.S./Canada renewal rate improved to 92.3%, and worldwide rate to 89.8%.
• Ancillary Businesses: Gas business had a record year, saving members ~$3.2 billion. Pharmacy sales grew nearly 20% driven by digital capabilities and GLP-1/fertility programs. Travel sales grew double-digits, with cruise bookings up 16%.
• Merchandising & Value: Focus on agile item-driven model. Strong performance in gold/jewelry, home furnishings, and health/beauty (K-beauty trends). Reinvested tariff refunds into price reductions on everyday items.
• Supply Chain: Inventory flowing smoothly despite minor typhoon/Canal delays. LIFO charge of $152 million due to memory costs and petroleum-related inflation.

The transcript does not provide a detailed financial breakdown by specific product segment (e.g., Fresh, Non-Foods) in absolute monetary terms or revenue contribution percentages. However, it notes that net sales for the fourth quarter were $93.87 billion. Comparable sales grew 9.4% overall (6.7% adjusted for gas and FX). Key performance highlights include non-food comparable sales growing mid-to-high single digits, fresh sales growing mid-single digits, and ancillary businesses (gas, pharmacy, travel) showing strong growth with gas comps up high-30s and pharmacy sales growing nearly 20% year-over-year.

• Capital Expenditure: Planning approximately $7.5 billion in capital expenditure for fiscal year 2027, driven by the pipeline of new warehouses and supply chain investments.
• Growth Targets: Aiming for a run rate of 30 net new warehouse openings per year.
• No Specific Financial Guidance: Management explicitly stated they do not provide guidance on particular metrics like membership growth rates or specific comp sales figures, noting that recent trends are typical for their current stage.
• Tariff Refunds: Intended to continue reinvesting the majority of IEPA tariff refund dollars into increased member value through price reductions.

• Inflationary Pressures: Increased non-food inflation driven by memory costs in consumer electronics and petroleum-based items (gas, motor oil, resins).
• LIFO Charges: Significant LIFO charge ($152 million in Q4) impacting gross margin, largely due to end-of-year inventory true-ups for inflation in electronics and fuel-related products.
• Geopolitical & Supply Chain Disruptions: Ongoing conflict in the Middle East affecting commodity prices; potential impacts from future tariffs and shipping disruptions (typhoons, Panama Canal delays).
• GLP-1 Pricing Headwinds: Continued pressure on pharmacy margins due to lower drug prices resulting from Medicare maximum fair price changes, though offset by volume growth and program expansions.

Q: An analyst asked if the reinvestment of tariff refunds into price cuts has meaningfully changed sales trajectories, noting moderation. / A: CFO Gary Millerchip stated that excluding gas, comp sales remain robust at 6-7%. He emphasized that members show resilience and willingness to spend on discretionary value items, citing strong non-food and travel growth as evidence that the value proposition remains compelling despite price adjustments.

Q: An analyst questioned the narrowing spread between membership unit growth and sales growth, asking if existing member spend drives this. / A: Millerchip highlighted record executive membership penetration and younger member acquisition (<40 demographic now >25% of base) as quality indicators. He noted that higher executive penetration and digital engagement lead to higher spend per member and better renewal rates, suggesting the mix shift is positive for long-term top-line growth.

Q: An analyst asked about vendor price increase visibility and the role of Kirkland Signature in mitigating them. / A: CEO Ron Vachris explained that visibility ranges from 30 to 90+ days depending on commodities. He affirmed that the expanding Kirkland Signature brand serves as a critical tool to fight back on pricing, allowing Costco to maintain low prices even as some vendor costs rise.

Q: An analyst asked about Costco's position in 'agentic commerce' and AI search. / A: Millerchip described AI as an emerging opportunity where members use tools like Gemini and OpenAI to search for products. While still a low base, traffic and sales from AI search grew triple-digits. Costco benefits from its curated assortment and lack of paid ads, ensuring its value and quality appear transparently in neutral AI environments.

Q: An analyst asked how the optimal orientation of the club might change given the influx of younger, digitally savvy members. / A: Millerchip clarified that while younger members engage digitally first, the physical warehouse remains crucial for the 'treasure hunt' experience and building loyalty. He noted that members who engage both digitally and in-club are more loyal and shop more frequently, reinforcing the hybrid model rather than shifting focus away from warehouses.