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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 Q1 2026 Earnings: A Strong Performance

Costco Wholesale Corporation reported a robust financial performance for the first quarter of 2026, with net income reaching $2.001 billion or $4.5 per diluted share, representing a 13.6% growth in net income and earnings per diluted share, excluding discrete tax items. Net sales stood at $65.98 billion, an 8.2% increase from $60.99 billion in the same quarter last year, driven by a 6.4% rise in comparable sales. The company's earnings per share (EPS) came in at $4.5, slightly above analyst estimates of $4.27, but the actual reported EPS was $4.34 when considering the diluted share count.

Publication Date: Dec -20

📋 Highlights
  • Net Income & Earnings Growth: Net income rose 12.4% to $2.001 billion ($4.50 EPS), with non-GAAP growth at 13.6% year-over-year.
  • Net Sales Expansion: Total net sales hit $65.98 billion, an 8.2% increase YoY, driven by 6.4% comparable sales growth and 20.5% digital sales surge.
  • Membership Fee Revenue: Membership income climbed 14% to $1.329 billion, supported by 5.2% growth in total paid members (81.4 million) and 5.1% cardholder increase (105.9 million).
  • Warehouse Expansion: Opened 8 new warehouses in Q1, with plans for 30+ annual openings, and $6.5 billion in projected 2026 capital expenditures for growth initiatives.
  • Margin Improvements: Gross margin expanded 4 basis points to 11.32%, with core margins rising 30 basis points, offset by 1 basis point SG&A increase due to healthcare costs.

Revenue Growth Drivers

The company's revenue growth was driven by a combination of factors, including a 6.4% increase in comparable sales, a 14% rise in membership fee income to $1.329 billion, and a 5.2% growth in total paid members to 81.4 million. Digitally enabled comparable sales grew by 20.5%, indicating a strong shift towards online shopping. Fresh sales were up mid to high single digits, led by double-digit growth in meat, while nonfoods had comp sales in the mid-single digits, driven by categories such as gold and jewelry, special events, health and beauty.

Margin Performance

Gross margin stood at 11.32%, higher by four basis points year over year, while core margins on their own sales were higher by 30 basis points. The SG&A rate was higher by one basis point, driven by higher healthcare costs. The company's ability to maintain its margin profile despite inflationary pressures is a testament to its operational efficiency.

Growth Initiatives

Costco is focused on driving growth through various initiatives, including digital transformation, with AI being integrated into various business areas, such as pharmacy inventory management. The company plans to open 30-plus new warehouses per year, with a mix of infill locations in established markets and new markets. International expansion is also a key area of focus, with recent openings in Sweden and France, and upcoming openings in Asia.

Valuation

With a P/E Ratio of 45.76 and a P/B Ratio of 12.54, the market appears to be pricing in a high level of growth for Costco. The company's ROE stands at 29.61%, indicating a strong return on equity. The EV/EBITDA ratio is 27.1, suggesting that the company's enterprise value is reasonable relative to its earnings before interest, taxes, depreciation, and amortization. The dividend yield is 0.59%, which, while not particularly high, is a stable source of return for investors.

3. NewsRoom

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Ashton Thomas Private Wealth LLC Acquires 3,314 Shares of Costco Wholesale Corporation $COST

Feb -04

Source: defenseworld.net

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J.W. Cole Advisors Inc. Sells 2,564 Shares of Costco Wholesale Corporation $COST

Feb -04

Source: defenseworld.net

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Cherry Creek Investment Advisors Inc. Sells 738 Shares of Costco Wholesale Corporation $COST

Feb -04

Source: defenseworld.net

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Stock Market Today, Feb. 3: Nasdaq Tumbles 1.4% as AI Fears Grow

Feb -03

Source: fool.com

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Costco's Membership Model Continues to Deliver Predictable Growth

Feb -03

Source: zacks.com

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Nine Out of Ten Costco Members Renew: Inside the Metric That Powers a $14B Profit Engine

Feb -03

Source: 247wallst.com

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Costco Wholesale Corporation $COST Shares Sold by Silphium Asset Management Ltd

Feb -03

Source: defenseworld.net

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Thrivent Financial for Lutherans Trims Holdings in Costco Wholesale Corporation $COST

Feb -03

Source: defenseworld.net

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: 5.2/10

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

978.35$

Current Price

978.35$

Potential

-0.00%

Expected Cash-Flows