- Net Income Growth Q2 2026 net income rose 14% to $2.035 billion, driven by $4.58 per diluted share earnings.
- Sales Expansion Net sales hit $68.24 billion, a 9.1% year-over-year increase, with comparable sales up 7.4%.
- Membership Fee Surge Membership income climbed 13.6% to $1.355 billion, supported by 9.5% growth in executive memberships.
- Digital Sales Momentum Digitally-enabled sales surged 21.8%, reflecting robust investments in digital enhancements and member engagement.
- Gross Margin Improvement Gross margin expanded 17 basis points to 11.02%, despite price cuts, aided by supply chain efficiencies.
Revenue Growth Drivers
Membership fee income rose 13.6% to $1.355 billion, driven by a 9.5% increase in paid executive memberships and a 4.8% rise in total paid members. The company had a strong performance in non-food departments, including jewelry, majors, and small appliances, and ancillary businesses such as pharmacy, food court, and optical were top performers. Digitally-enabled sales grew 21.8%, indicating a strong online presence.
Operational Highlights
The company opened 4 new warehouses, increasing its total count to 924 worldwide, and targets 28 net new openings in fiscal 2026. Ron Vachris addressed tariffs, stating the company is working to mitigate their impact on prices. The company lowered prices on items such as eggs, cheese, and coffee, and will pass on savings to members if tariff refunds are received.
Valuation and Growth Expectations
With a P/E Ratio of 51.83 and an expected revenue growth rate of 7.6% next year, the market is pricing in a high growth trajectory for Costco. The company's ROIC of 19.14% and ROE of 28.81% indicate strong profitability. The Dividend Yield is 0.52%, and the Free Cash Flow Yield is 2.05%, suggesting a reasonable return for investors.
Future Outlook
The company is investing in digital enhancements, including prepaying card and line breaking, which are improving the member experience and efficiency. Management noted that weather created volatility in the first two months but didn't have a major impact on total sales results. The company feels confident in its value proposition and prices, which should allow it to perform well in searches and attract members.
International Expansion
Internationally, Canada's average unit volume (AUV) is approaching $300 million, with 114 warehouses. The company feels good about its expansion path in Canada and internationally, with a strong pipeline for future growth. The company is being more creative with real estate, using parking decks and unique models to enter markets that were previously difficult to access.