Costco Wholesale (NASDAQ: COST) reported fiscal fourth-quarter earnings that topped Wall Street's expectations, but a closer look reveals that the bulk of the beat came from a one-time tariff refund, not core operational strength. The warehouse club earned $6.75 per share for the quarter ended August 30, 2026, surpassing the consensus estimate of $6.53. However, the company disclosed that a $0.15 per-share benefit from a tariff refund, after reinvestment in member value, contributed to the results.
Excluding that refund, adjusted EPS would have been $6.60—just $0.07 above the analyst consensus. That means the refund accounted for approximately 68% of the reported earnings beat, according to calculations by TS2. The modest core beat suggests that underlying profitability was relatively in line with expectations, despite strong top-line growth.
Revenue and Membership Growth
Costco's total revenue surged 11.1% year-over-year to $95.72 billion, driven by a robust 11.2% increase in net sales to $93.87 billion. Membership fees rose 7.3% to $1.85 billion, reflecting a 3.8% increase in paid members to 84.1 million and a worldwide renewal rate of 89.8%. The company's operating income advanced 13.8% to $3.80 billion, outpacing revenue growth and indicating improved operational efficiency.
Comparable sales, adjusted for fuel price and currency fluctuations, grew 6.7% globally, with U.S. comps up 7.2%. Digitally enabled sales jumped 19.5% on a reported basis, nearly three times faster than total company growth, underscoring the strength of Costco's e-commerce channel. Shopping frequency increased 3.3%, and the average ticket size rose 3.3% on an adjusted basis, indicating that both traffic and basket size contributed to growth.
Tariff Refund Impact and Margin Dynamics
Chief Financial Officer Gary Millerchip stated during the earnings call that the company would reinvest the majority of expected refunds into member value. The $0.15 benefit in Q4 is part of a larger tariff refund initiative, and Costco has already received a similar amount in the current fiscal first quarter. The refunds have a dual effect on margins: reported gross margin fell 11 basis points to 11.02%, partly due to faster gas sales, but excluding fuel inflation, refunds, and related reinvestment, core merchandise margin actually rose 18 basis points.
This accounting nuance is critical for investors. While the headline EPS beat looks impressive, the underlying earnings power is more muted. The company's forward valuation, at 39.4 times fiscal 2027 consensus EPS of $22.68, leaves little room for disappointment. The analyst mean price target of $1,063 implies 18.8% upside from Thursday's close of $896.48, but the stock traded at $894.55 in premarket, down 0.22%, reflecting a cautious reaction.
Analyst Divergence and Risks
Analyst recommendations are far from uniform. Roth MKM reiterated a Sell rating with a $781 price target, while D.A. Davidson maintained a Hold at $1,040. Wells Fargo trimmed its target to $950 from $1,000, keeping a Hold stance, and Citi also held at $1,020. BTIG remains bullish with a Buy and $1,125 target. This divergence highlights the uncertainty around Costco's ability to sustain its growth trajectory amid consumer headwinds and potential tariff-related volatility.
Risks include a slowdown in consumer spending or weaker discretionary demand, which could break the 6%-7% core comp range. Gas inflation has boosted headline sales, but future tariff refunds may continue to distort earnings comparisons. The high multiple offers little cushion if renewal rates or margins slip.
Investors will get the next data point on October 7, when Costco reports September sales. That report will provide a clearer picture of whether adjusted comparable sales have held their recent range, before additional refund benefits enter the quarterly profit picture.
