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1. Company Snapshot

1.a. Company Description

Costco Wholesale Corporation, together with its subsidiaries, engages in the operation of membership warehouses in the United States, Puerto Rico, Canada, the United Kingdom, Mexico, Japan, Korea, Australia, Spain, France, Iceland, China, and Taiwan.It offers branded and private-label products in a range of merchandise categories.The company offers sundries, dry groceries, candies, coolers, freezers, liquor, and tobacco and deli products; appliances, electronics, health and beauty aids, hardware, garden and patio products, sporting goods, tires, toys and seasonal products, office supplies, automotive care products, postages, tickets, apparel, small appliances, furniture, domestics, housewares, special order kiosks, and jewelry; and meat, produce, service deli, and bakery products.


It also operates pharmacies, opticals, food courts, hearing-aid centers, and tire installation centers, as well as 636 gas stations; and offers business delivery, travel, same-day grocery, and various other services online in various countries.As of August 29, 2021, the company operated 815 membership warehouses, including 564 in the United States and Puerto Rico, 105 in Canada, 39 in Mexico, 30 in Japan, 29 in the United Kingdom, 16 in South Korea, 14 in Taiwan, 12 in Australia, 3 in Spain, 1 in Iceland, 1 in France, and 1 in China.It also operates e-commerce websites in the United States, Canada, the United Kingdom, Mexico, South Korea, Taiwan, Japan, and Australia.


The company was formerly known as Costco Companies, Inc.and changed its name to Costco Wholesale Corporation in August 1999.Costco Wholesale Corporation was founded in 1976 and is based in Issaquah, Washington.

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1.b. Last Insights on COST

Negative drivers behind Costco Wholesale Corporation's recent performance include tepid comparable sales, which fell short of estimates in May, and a slight decline in June sales. The company's premium valuation may give value buyers pause, despite its strong e-commerce growth and membership gains. Additionally, Costco faces downgrades, a death cross, and insider selling, which may indicate a shift in investor sentiment. The company's recent earnings release did not provide any significant catalysts for growth, and its robust balance sheet and disciplined buybacks have not been enough to offset these negative factors.

1.c. Company Highlights

2. Costco's Q2 2026 Earnings: Strong Sales Growth and Membership Increase

Costco's Q2 2026 net income was $2.035 billion or $4.58 per diluted share, up 14% from $1.788 billion or $4.02 per diluted share in Q2 2025. Net sales were $68.24 billion, a 9.1% increase from $62.53 billion in Q2 2025. Comparable sales were up 7.4%, or 6.7% adjusted for gas price deflation and foreign exchange. The actual EPS of $4.58 beat estimates of $4.55. Gross margin was 11.02%, higher by 17 basis points year-over-year.

Publication Date: Mar -07

📋 Highlights
  • 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.

3. NewsRoom

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If You'd Invested $1,000 in Costco Stock 10 Years Ago, Here's How Much You'd Have Today

Mar -21

Source: fool.com

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Tariff-Related Lawsuits Could Hurt Costco Stock, but the Reason Why May Surprise You

Mar -21

Source: fool.com

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Costco CEO Ron Vachris never takes his name tag off. 🏷️

Mar -20

Source: youtube.com

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3 Recession-Proof Stocks to Buy Before the Next Market Crash

Mar -20

Source: fool.com

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First Look: FedEx beats, Wegovy HD cleared, Nexstar-Tegna closes

Mar -20

Source: gurufocus.com

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Costco Wholesale Corporation $COST Shares Purchased by Coastline Trust Co

Mar -20

Source: defenseworld.net

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Costco Wholesale Corporation (NASDAQ:COST) Receives Consensus Recommendation of “Moderate Buy” from Analysts

Mar -20

Source: defenseworld.net

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Market Today: Big Banks, Novo Nordisk, Tesla in Focus

Mar -19

Source: gurufocus.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.00%)

6. Segments

Membership Warehouses

Expected Growth: 6.0%

Costco's membership warehouses growth is driven by increasing demand for bulk purchases, expanding membership base, and high renewal rates. Efficient supply chain management and strategic pricing also contribute to its 6.0% growth. Strong brand loyalty and investments in e-commerce capabilities further enhance its market position.

7. Detailed Products

Kirkland Signature Brand Products

Kirkland Signature is Costco's in-store brand, offering a wide range of products from groceries to household essentials, often at a lower price point than name-brand products.

Fresh Produce

Costco offers a variety of fresh produce, including fruits, vegetables, and flowers, often in bulk.

Meat, Seafood, and Poultry

Costco sells a range of fresh and frozen meats, seafood, and poultry products, often in bulk.

Dairy and Bakery Products

Costco offers a variety of dairy products, including milk, cheese, and yogurt, as well as bakery products like bread and pastries.

Pharmacy Services

Costco operates pharmacies in many of its warehouse locations, offering a range of prescription and over-the-counter medications.

Optical Services

Costco offers optical services, including eye exams and glasses, in many of its warehouse locations.

Tire Centers

Costco operates tire centers in many of its warehouse locations, offering a range of tires and tire services.

Travel Services

Costco offers travel services, including vacation packages, cruises, and insurance.

E-commerce Services

Costco offers e-commerce services, allowing customers to shop online and have products delivered to their homes.

8. Costco Wholesale Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Costco's unique membership model and bulk purchasing experience make it difficult for customers to switch to traditional retailers, reducing the threat of substitutes.

Bargaining Power Of Customers

While Costco's customers are price-sensitive, the company's loyal membership base and efficient operations allow it to maintain a balance between customer demands and profitability.

Bargaining Power Of Suppliers

Costco's massive scale and efficient supply chain give it significant negotiating power with suppliers, allowing it to maintain low costs and pass savings to customers.

Threat Of New Entrants

The high capital requirements and operational complexities of a warehouse club model create significant barriers to entry, making it difficult for new entrants to compete with Costco.

Intensity Of Rivalry

While Costco faces competition from other retailers, its efficient operations and loyal customer base allow it to maintain a competitive edge, but still face pricing pressure from rivals.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 25.94%
Debt Cost 4.28%
Equity Weight 74.06%
Equity Cost 9.15%
WACC 7.89%
Leverage 35.02%

11. Quality Control: Costco Wholesale Corporation passed 7 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Quality: 6.5

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Momentum: 7.0

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A-Score: 5.4/10

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Yield: 2.0

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Costco Wholesale

A-Score: 5.2/10

Value: 2.0

Growth: 6.8

Quality: 5.7

Yield: 2.0

Momentum: 5.0

Volatility: 10.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

972.33$

Current Price

972.33$

Potential

-0.00%

Expected Cash-Flows