Costco Wholesale delivered a robust performance for its fiscal second quarter, surpassing Wall Street projections on both the top and bottom lines. The membership-based retailer reported quarterly revenue of $69.60 billion, a significant increase from the $63.72 billion recorded in the prior-year period. Net income for the quarter reached $2.04 billion, translating to diluted earnings per share of $4.58, up from $4.02 per share a year ago.
The company's comparable sales, adjusted for fuel and foreign exchange impacts, rose 6.7%, exceeding the analyst consensus forecast of 5.88%. For the month of February, net sales climbed 9.5%, indicating sustained momentum beyond the core holiday season. A notable driver was digitally enabled sales, which surged 21.8% for the four-week period ending March 1.
During the earnings discussion, Costco's management addressed the potential impact of tariff refunds. Chief Executive Ron Vachris described the situation as "extremely fluid" but stated the company's intent to pass along any recoveries to its members through lower prices and enhanced value. This follows a recent Supreme Court decision that invalidated certain tariffs levied under the International Emergency Economic Powers Act, potentially unlocking up to $175 billion for refunds to importers like Costco.
However, executives cautioned that the timing and magnitude of any refund remain uncertain. A U.S. trade judge is scheduled to meet with legal teams to establish a process for handling the complex task of reviewing tens of millions of tariff payments. Chief Financial Officer Gary Millerchip noted additional macroeconomic concerns, including instability in the Middle East that could affect fuel costs and global shipping schedules.
Membership metrics showed a mixed picture. The company ended the quarter with 82.1 million paid household members. While the global renewal rate held steady at 89.7%, the rate in the U.S. and Canada dipped slightly by 10 basis points to 92.1%. Management attributed this minor decline to a higher proportion of newer members who initially joined through online channels, who historically demonstrate slightly lower retention rates than those who sign up in warehouses.
Membership fee revenue continued to be a strong contributor, jumping 13.6% year-over-year to $1.355 billion. The retailer maintained its global warehouse count at 924 locations and reaffirmed its plan to open a net 28 new warehouses during fiscal 2026, part of a longer-term strategy to exceed 30 new annual openings.
The competitive landscape for value-oriented retailers remains intense. Rival BJ's Wholesale Club reported comparable club sales growth of 2.6% for its recent quarter, excluding gasoline, and projected gains of 2% to 3% for its full fiscal year. Walmart continues to attract a broad customer base across income segments. Costco's recent sales growth has outpaced these competitors by a considerable margin.
David Wagner, head of equity and portfolio manager at Aptus Capital Advisors, suggested that Costco continues to benefit from a "safe haven" status among investors amid ongoing geopolitical volatility. Despite the high expectations heading into the report, the company's stock showed minimal movement in after-hours trading following the announcement.
Looking ahead, Costco's strategy hinges on maintaining its value proposition. The company has already reduced prices on categories like textiles, bedding, and cookware due to lower duties, employing tactics such as shifting production sources and increasing its reliance on the Kirkland Signature private label. The potential for tariff refunds presents a future opportunity to further this strategy, though its execution depends on an unresolved and complex legal and administrative process.
