The companies on the Global 500 employ 70.2 million people, and their revenue represents more than one-third of the world’s GDP.

Fortune Global 500

With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

AI is a major force shaping this year’s list—but it’s far from the only story.

World's Most Admired Companies

These companies use the creative forces of capitalism to solve big problems—and do well by doing good.

One by one, over the past year, many major retailers caved under pressure from conservative groups to weaken their diversity, equity, and inclusion (DEI) programs. But one chain bucked that trend: Costco Wholesale.In December, conservative think tank National Center for Public Policy Research submitted a shareholder <a target="_blank" rel="noopener noreferrer" href="https://s201.q4cdn.com/287523651/files/doc_financials/2024/ar/FY24-Proxy-Statement.pdf">proposal</a> that would have required Costco to evaluate DEI initiatives which it claimed hold “litigation, reputational and financial risks.” Hogwash, Costco’s board responded: DEI is good business, its directors said.“As our membership diversifies, we believe that serving it with a diverse group of employees enhances satisfaction,” Costco wrote. Costco shareholders and customers seem to agree. In the shareholder proxy vote, 98% of votes cast opposed the proposal. In the first three quarters of this fiscal year, net sales were up 8%, outperforming most competitors; and surveys of customer satisfaction suggested that no Costco users were defecting.

Change the World

The corporations on our annual list of the world's 500 largest companies combined to generate $41.7 trillion in revenue over the past year.

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

Leaders in all industries rely more than ever on Big Tech—and appreciate the giants that deliver, at scale, without drama.

The corporations on our annual list posted aggregate revenues of $41 trillion for the second year in a row.

Industries included in the sector are automotive retail, general merchandisers, internet retail, and specialty retail.

Fortune Sector Leaders: Retailing

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The 26th edition of the list shows how much esteem Big Tech giants command among other business leaders.

WMA 2024-Costco

The 25th Fortune World’s Most Admired Companies list suggests that tech giants’ peers respect them as much as ever.

The corporations on our annual list of the world’s largest companies delivered a record $41 trillion in aggregate revenues.

G500-2023-Costco

The retail giant, beloved for its bulk discounts and its $1.50 hot-dog-and-soda combo, continued to benefit from the return to in-person shopping. Revenue rose 16% in 2022 over the previous year, while profits rose 17%. 
<ul> 
 	<li>At the end of its fiscal second quarter in March 2023, the company claimed a 92.6% membership renewal rate.</li> 
 	<li>As of May 2023, Costco had 123 million member-cardholders, in 14 nations; 852 warehouses; and 304,000 full- and part-time employees worldwide.</li> 
</ul>

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

F500 2023-Costco

Just as it dominates our economy, Big Tech now dominates Fortune’s annual ranking of corporate reputation.

WMAC 2022-11-Costco

Aggregate sales hit $37.8 trillion last year—an increase of 19%, the highest annual growth rate in the list’s history.

G500 2022-26-Costco Wholesale

Costco had a smashing 2021, closing the year in record-breaking style as the pandemic eased and shoppers returned to in-person shopping at their favorite retailers. Costco's $5 billion in net income was 25% higher than in the year prior. With inflation surging to a four-decade high, the wholesaler raised its prices but still saw a 91% membership renewal rate. Like many other employers in the U.S., Costco raised its minimum wage in the fight to retain talent, upping that rate to $17 in October 2021. The warehouse supermarket giant partnered with Uber to trial a delivery service in Texas, and it collaborated with public health authorities to help get America vaccinated against COVID. Seeing more foot traffic in its stores, Costco debuted touchless condiment dispensers in its food courts, and brought back customer favorites like churros and smoothies to its menu. Costco pleased investors as well as shoppers in 2021 by delivering a 52% shareholder return for the year.

This year’s Fortune 500 marks the 68th running of the list.

F500 2022 Costco

Costco had a smashing 2021, closing the year in record-breaking style as the pandemic eased and shoppers returned to in-person shopping at their favorite retailers. Costco's $5 billion in net income was 25% higher than in the year prior. With inflation surging to a four-decade high, the wholesaler raised its prices but still saw a 91% membership renewal rate. Like many other employers in the U.S., Costco raised its minimum wage in the fight to retain talent, upping that rate to $17 in October 2021. The warehouse supermarket giant partnered with Uber to trial a delivery service in Texas, and it collaborated with public-health authorities to help get America vaccinated against COVID. Seeing more foot traffic in its stores, Costco debuted touchless condiment dispensers in its food courts, and brought back customer favorites like churros and smoothies to its menu. Costco pleased its investors as well as shoppers in 2021 by delivering a 52% shareholder return for the year.

After a year in which humanity leaned more heavily than ever on tech giants, see which companies topped Fortune's ranking of corporate reputation.

WMAC 2021-10-Costco

Total revenue for the world’s biggest companies fell 4.8% to $31.7 trillion this year—the first decline in half a decade.

G500-2021-027-Costco

Despite the pandemic, Costco Wholesale drew throngs of shoppers to its stores, as consumers looked to buy everyday staples in bulk. The company quickly adapted to the crisis conditions, making mask-wearing mandatory and giving workers permanent raises to keep them motivated, moves that fueled a 9.2% increase in sales last fiscal year. In addition, Costco’s e-commerce apparatus finally went into high gear, allowing it to better compete against Sam’s Club, among others. Costco’s momentum has continued into 2021, with its hold on members as strong as ever.

These companies use the creative tools of capitalism—including the profit motive—to address society’s unmet needs.

CTW 2021-03-Costco

In the war for retail talent during the pandemic, Costco Wholesale put its money where its mouth is. Already a leader in incentives like paid sick days, Costco in February raised the internal minimum wage for its 200,000-plus–person workforce to $16, keeping the pressure on competitors to pay their own workers more. Not long afterward, Amazon and Walmart each gave raises to hundreds of thousands of their workers. Costco’s reward for its efforts: double-digit percentage increases in sales—long after pandemic panic-buying eased—and customers as loyal as ever.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-12-Costco

For an astounding 13th straight year, Apple claims the top spot in Fortune’s annual ranking of corporate reputation, based on a survey of almost 3,800 executives, directors, and analysts.

This year's Fortune Global 500 generated $33.3 trillion in revenues and $2.1 trillion in profits.

G500-2020-033-Costco

With 782 stores and 99 million membership-card holders worldwide, Costco had a strong 2019, posting an 8% increase in overall revenue. That reflected a 6% boost in same store sales and a 7% gain in membership revenue. Profits, meanwhile, jumped 17%. The company opened its first store in China, located in western Shanghai, last year, and had 139,000 membership sign-ups on its first day of operation there. The retailer has been pushing to expand its ecommerce offerings, including click-and-collect, as well as offering same-day grocery delivery in most of its U.S. locations. It has also begun looking at vertical integration, investing in its own poultry processing plant in Nebraska and in a California greenhouse growing organic lettuce to supply its stores.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-014-Costco

Here are the World's Most Admired Companies for 2019 as ranked in their industries. See who made the list.

This year's Fortune Global 500 generated $27.7 trillion in revenues and $1.5 trillion in profits.

This year's Fortune 500 marks the 65th running of the list.

Here are the World's Most Admired Companies for 2018 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 64th running of the list.

Here are the World's Most Admired Companies for 2017 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 63rd running of the list.

Here are the World's Most Admired Companies for 2016 as ranked in their industries. See who made the list.

This year's Fortune Global 500 generated $27.6 trillion in revenues and $1.5 trillion in profits.

This year's Fortune 500 marks the 62nd running of the list.

Business insiders have spoken: Asked which companies they most admire, more than 4,100 executives, directors, and analysts chose these top 50 All-Stars.

The world's 500 largest companies generated $31.2 trillion in revenues and $1.7 trillion in profits in 2014. Together, this year's Fortune Global 500 employ 65 million people worldwide and are represented by 36 countries.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Nike, Cisco, MasterCard, SABMiller, Vodafone, Google—and 45 other companies that are doing well by doing good.

Global business is back. After limping through a worldwide financial crisis and economic slowdown, the 500 largest companies ranked by revenues shattered all sorts of performance records in 2013: They racked up combined revenues of $31.1 trillion, up 2.5% from 2012, and profits soared 27% to nearly $2 trillion. China’s 95 companies (up from 89 last year) posted $5.8 trillion in revenues. The U.S. has four fewer companies on the list than last year but remains (for now) the country leader, with 128 corporations on the list—including No. 1 Wal-Mart Stores—reporting $8.6 trillion in revenues. 

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

Change The World

Impact Segment

Sector

Prior Year Rank

Industry

Current All-Star Rank

Previous All-Star Rank

Industry Rank

Previous Industry Rank

Overall Score

Innovation

People Management

Use of Corporate Assets

Social Responsibility

Quality of Management

Financial Soundness

Long-Term Investment Value

Quality of Products/Services

Global Competitiveness

Key Financials (last Fiscal Year)

Revenues ($M)

Profits ($M)

Assets ($M)

Total Stockholder Equity ($M)

Profit Ratios

Profit as % of Revenues

Profits as % of Assets

Profits as % of Stockholder Equity

Earnings Per Share (last Fiscal Year)

Earnings Per Share ($)

EPS % Change (from prior fiscal year)

EPS % Change (5 year annual rate)

EPS % Change (10 year annual rate)

Total Return

Total Return to Investors (last year)

Total Return to Investors (5 year, annualized)

Total Return to Investors (10 year, annualized)

Costco Wholesale is known for its operation of membership warehouses globally, along with its e-commerce websites. The retailer offers branded and private-label products in a range of merchandise categories, including groceries, and is also responsible for gas sales, pharmaceutics, hearing-aid centers, and tire installation centers, as well as various online services. Costco was founded in 1976.

Q4 2026

Q3 2026

Q2 2026

Q1 2026

Q4 2025

Q3 2025

Q2 2025

Q1 2025

Costco Wholesale (COST): Company Profile, Stock Price, News, Rankings

legacy

Costco Wholesale

costco wholesale

Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Costco Wholesale Corporation first quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time. Thank you, and I would now like to turn the conference over to Gary Millerchip, Chief Financial Officer. You may begin.

Good afternoon, everyone, and thank you for joining us for Costco's first quarter 2026 earnings call. I'd like to start by reminding you that these discussions will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that may cause actual events, results, and/or performance to differ materially from those indicated by such statements. The risks and uncertainties include, but are not limited to, those outlined in today's call, as well as other risks identified from time to time in the company's public statements and reports filed with the SEC. Forward-looking statements speak only as of the date they are made, and the company does not undertake to update these statements except as required by law.

Comparable sales and comparable sales excluding impacts from changes in gasoline prices and foreign exchange are intended as supplemental information and are not a substitute for net sales presented in accordance with GAAP. Before we dive into our financial results, I'm delighted to say that Ron Vachris is once again joining me for today's call. I'll now hand over to Ron for some opening comments.

Thank you, Gary. And good afternoon, everyone. Thank you for joining us today. I'll start with a few brief comments on some of our key growth initiatives before turning it back to Gary to discuss the results of the quarter. In Q1, we opened eight new warehouses, including a relocation in Canada, our third warehouse in France, four net new U.S. locations, and two additional Canadian business centers. This brings our total warehouse count to 921 worldwide. We continue to see significant opportunities for future warehouse growth both domestically and across the international markets and where we operate. While delays with a couple of our buildings in Spain resulted in us revising our planned net new openings for fiscal year 2026 down to 2028, we continue to plan for 30+ net openings per year in future years.

We've increased the size of our real estate team to support this goal, and without compromising on quality, we're being creative with real estate projects to further increase the potential for future growth. Recent examples of this include our new warehouse in Mulhouse, France, where we converted an old Hypermart into a Costco warehouse, as well as two Canadian business centers that opened in the last month, both of which were refurbished home improvement warehouses. This approach broadens our options for market expansion and lowers the capital investment required. In addition to opening net new buildings, we will continue to relocate select high-volume warehouses to larger locations with more parking and expanded gas stations. By doing this, we're able to provide a better experience for our members and significantly accelerate sales growth in those markets.

In fiscal year 2026, we have five relocations planned, including three in the U.S. and one each in Canada and Taiwan. The success of our new warehouse expansion has allowed us to consistently drive top-line revenue well in excess of our comparable sales and gain significant market share. We continue to see improvements in the performance of our new buildings and a reduction in their time to maturity. With fiscal year 2025 openings generating an annualized $192 million per warehouse of sales in the year of opening, that is up from $150 million for new warehouses opened just two years earlier. Turning to digital, our digital vision at Costco is to deliver a seamless experience that builds trust and loyalty with our members both in warehouse and online.

We aim to make the shopping at Costco easier, faster, and more personal, no matter where or how our members choose to shop. This isn't about technology for technology's sake. It's about using technology to strengthen the fundamentals that makes Costco who we are: increasing member loyalty, driving top-line sales, and improving efficiency in our operations so that we can bring goods to market at the lowest possible price. Progress has already begun and is delivering tangible results. In the warehouse, implementation of scanning memberships at entry, the Costco digital wallet, and pre-scanning small to medium-sized baskets is leading to better member experience and improved productivity. The warehouses that have first adopted this pre-scan technology have shown checkout speed improvements of up to 20%. And across our U.S. warehouses overall, we achieved record levels of checkout productivity in the final weeks of the quarter.

Online, we continue to make enhancements to improve the member experience on our site and app. As an example, this quarter, we launched new personalization capabilities that provide members with more relevant product recommendations based on their past search history. The sales lift from this enhancement has been very positive. AI is also being interwoven into our business, where we believe it can strengthen our model. Again, we're approaching it in a very Costco way: practical, member-focused, and grounded in tangible business value. An early use case has involved integrating AI into our pharmacy inventory system. This system now compares prescription drug pricing across vendors and autonomously and predictively reorders inventory, improving our in-stocks to more than 98%. This change has played an important role in helping us achieve mid-teen growth in pharmacy scripts filled and has improved margins while lowering prices to our members.

We're now in the process of deploying AI tools in our gas business, which we expect will improve inventory management and drive incremental sales by ensuring we're always delivering the best value to our members. These are just a few of the use cases we're developing into our business as we speak. While digital and technology will play an important role in our future, our people are what makes Costco special. I'd like to recognize the outstanding work done by our more than 340,000 employees around the world. Their commitment to our company and the Costco experience for our members is what drives our success. I'd like to thank our entire team for their outstanding work this year and especially now during our busiest season. I also wanted to mention that our annual update to Costco's sustainability commitments was made available online earlier this month.

This report provides a comprehensive review of the progress we're making towards our sustainability objectives, and I would encourage you to take a look. With that, I'll turn it back over to Gary to discuss the results for the quarter, and I'll jump back on during Q&A to field some questions.

Thanks, Ron. In today's press release, we reported operating results for the first quarter of fiscal year 2026, the 12 weeks ended November 23rd. As usual, we published a slide deck under events and presentations on our investor website with supplemental information to support today's press release. Net income for the first quarter came in at $2.001 billion, or $4.50 per diluted share, up from $1.798 billion, or $4.04 per diluted share in the first quarter last year. This year's results include a tax benefit of $72 million, or $0.16 per diluted share, relating to stock-based compensation. And last year's results include a tax benefit of $100 million, or $0.22 per diluted share, also related to stock-based compensation. Excluding these discrete tax items, net income and earnings per diluted share both grew 13.6%.

Net sales for the first quarter were $65.98 billion, an increase of 8.2% from $60.99 billion in the first quarter last year. Comparable sales were 6.4%, both before and after adjusting for gas price deflation and FX. Excluding gas sales entirely and adjusting for the impact of foreign exchange, comparable sales were 7.1%. Digitally enabled comparable sales were 20.5%, both with and without adjusting for FX. Our segment breakout of comparable sales is disclosed in both our earnings release and the supplemental slide deck. In terms of Q1 comp sales metrics, FX positively impacted sales by approximately 0.1%, while gas price deflation negatively impacted sales by approximately 0.1%. Traffic or shopping frequency increased 3.1% worldwide, and our average transaction or ticket was up 3.2% worldwide, both with and without the impacts of gas price deflation and FX.

Moving down the income statement to membership fee income, we reported membership fee income of $1.329 billion, an increase of $163 million, or 14% year-over-year. Adjusting for FX, the increase was also 14%. Last September's U.S. and Canada membership fee increase accounted for a little less than half of membership income growth. Excluding the membership fee increase and FX, membership income grew 7.3% year-over-year. This was driven by continued growth in our membership base and increased upgrades from Gold Star to executive membership. At Q1 end, we had 39.7 million paid executive memberships, up 9.1% versus last year. We ended the quarter with 81.4 million total paid members, up 5.2% versus last year, and 145.9 million cardholders, up 5.1% year-over-year.

In terms of renewal rates, at Q1 end, our U.S. and Canada renewal rate was 92.2%, and the worldwide rate came in at 89.7%, both down 10 basis points from last quarter. This slight decline was due to the factors we discussed last quarter and reflects new online members growing as a percentage of our total base and renewing at a slightly lower rate than warehouse sign-ups. The decline was less than anticipated due to some early success with targeted communications to expiring members. Our goal is to continue to improve renewal rates by improving engagement with members who signed up digitally. Although for the reasons previously shared, we may still see a slight decline in the overall renewal rate over the next few quarters.

Turning to gross margin, our reported rate was higher year-over-year by four basis points, both with and without gas deflation, coming in at 11.32% compared to 11.28% last year. Core was flat. In terms of core margins on their own sales, our core-on-core margins were higher by 30 basis points. This increase was broad-based, with non-foods, foods and sundries, and fresh all higher year-over-year. Supply chain improvements and an increase in KS penetration benefited margins, as did additional marketing revenue. The improvement in core-on-core was offset by changes in mix and lapping higher income in our co-brand credit card program a year ago. Ancillary and other businesses' gross margin was higher by seven basis points, primarily driven by pharmacy and hearing aids. LIFO negatively impacted the gross margin rate by three basis points.

We had a $1.9 million LIFO credit in Q1 this year compared to a $19 million credit in Q1 last year. Moving on to SG&A, our reported SG&A rate was higher or worse year-over-year by one basis point, coming in at 9.6% compared to last year's 9.59%. The operations component of SG&A was higher or worse by one basis point. Our operators did a great job improving productivity and capturing efficiency benefits from the technology investments that Ron referenced earlier. These productivity improvements fully offset wage investments and the impact of extended operating hours and would have created positive leverage in the quarter had we not experienced higher healthcare costs. Central was lower or better by three basis points. This quarter's SG&A also included a charge relating to a tax assessment for prior years, which negatively impacted the rate by four basis points.

Below the operating income line, interest expense was $35 million versus $37 million last year. Interest income was $122 million versus $96 million last year, driven by higher cash balances. FX was another $33 million benefit versus a $51 million benefit last year due to lower FX gains. In terms of income taxes, our tax rate in Q1 was 22.5% compared to 22% in Q1 last year. As mentioned earlier, this year's rate benefited $72 million, and last year's rate benefited $100 million from annual RSU vestings. Turning now to some key items of note in the quarter. Capital expenditure in Q1 was approximately $1.53 billion. As shared last quarter, we are making additional investments to support a higher number of new warehouse openings, increased warehouse remodels to drive continued growth in existing high-volume buildings, depot network expansion, and digital.

We estimate capital expenditure for the full year will be approximately $6.5 billion. Before we take a closer look at core merchandising results for Q1, here are a few fun facts about the holiday selling season so far. Our U.S. food court set a daily record on Halloween, selling 358,000 whole pizzas, an increase of 31% versus last year. Black Friday was a record-breaking day for our U.S. e-commerce business, generating over $250 million in non-food orders. Our U.S. bakeries also set a record in the three days leading up to Thanksgiving, selling 4.5 million pies. That's over 7,000 pies per warehouse over a three-day period. Turning to Q1 merchandising highlights, our relentless focus on quality, value, and newness continued to deliver market share gains across virtually all departments. Fresh sales were up mid to high single digits, led by double-digit growth in meat.

We saw strong growth in higher-cost cuts of beef and even greater unit growth in lower-cost proteins like ground beef and poultry. Bakery experienced high single-digit growth, driven by the introduction of some great new items, such as our holiday dessert bars and our crème brûlée bar cake. Non-foods had comp sales in the mid-single digits. Our buyers continue to do an excellent job finding new and exciting items at great values, while also adjusting our assortment to minimize the impact of tariffs. Gold jewelry, special events, health, and beauty were all up double digits, and majors, tires, and small appliances also continue to outperform with high single-digit comps. We added a number of new national brand partnerships across a range of non-food categories in Q1, including Gap and Ulta gift cards, Vera Bradley apparel, and Upper Deck trading cards.

Food and sundries comps also grew mid-single digits, with candy and food showing the strongest results. Newness has been driving growth in this category as well, with on-trend items such as Dubai chocolate performing very well. Kirkland Signature continues to grow at a faster pace than overall sales, with KS items typically offering 15%-20% value compared to the national brand alternative with equal or better quality. In Q1, we launched approximately 45 new KS items, including dry facial daily clean towels, caramelized blueberry croissants, and various apparel items, in addition to our latest Food Court offering, the Caramel Brownie Sundae. As always, our goal is to be the first to lower prices where we see opportunities to do so.

A few examples of lower prices this quarter include KS chicken pot pie from $4.29 to $3.99 per pound, KS bacon from $18.99 to $16.99 per packet, KS whipped cream three-pack from $10.49 to $8.99, and KS walnuts three-pound pack from $14.49 to $12.99. In digital, site traffic in the quarter was up 24%, and app traffic was up 48%. Sales in non-foods were led by pharmacy, gold and jewelry, tires, small electrics, apparel, and majors, all of which grew double digits year-over-year. Our same-day delivery service offered in partnership with Instacart in the U.S. and Uber Eats and DoorDash internationally also performed extremely well, growing at a faster pace than our overall digital sales. Strong traffic and sales growth in digital were aided by continued web and app improvements, as well as the introduction of more personalized member communications.

We continue to see many opportunities to enhance digital engagement with our members and look forward to sharing progress on future earnings calls. Within ancillary businesses, Pharmacy, Food Court, hearing aids, and Optical departments all had strong quarters. Gas comps were low single digits. Gas prices remained slightly deflationary in the quarter, but this was offset by volume growth. Costco Travel is another way in which we deliver unique membership value, and these services continue to resonate well with our members. Our member-only rates for vacation packages, hotels, cruises, and rental cars often lead to hundreds or even thousands of dollars in savings, in addition to the great service provided by our fantastic Costco Travel agents. Costco Travel U.S. set an all-time daily sales record on Cyber Monday, before beating that record a day later on December 2nd.

In all, we achieved over $100 million in gross bookings in the U.S. through Costco Travel in the five days following Thanksgiving, up 12% from last year. Turning to inflation. Overall, inflation remained relatively consistent with recent quarters. Fresh and food and sundries saw higher inflation in commodities such as beef, seafood, and coffee, but this was offset by lower inflation in eggs, cheese, butter, and produce. In non-foods, we saw low single-digit inflation for the third consecutive quarter, primarily driven by gold and imported goods. Our buyers continue to do a great job reducing the impact of tariffs for our members.

The strategies being deployed to achieve this include changing the country of production for some items, sourcing more items produced in the U.S., consolidating buying efforts globally to lower the cost of goods across all our markets, and leaning into Kirkland Signature, where we have more control over the supply chain. Additionally, we are changing our item assortment where appropriate. As discussed last quarter, while we have a robust and exciting holiday merchandise selection in our U.S. warehouses, this represents a lower number of SKUs than in prior years. In replacement of some tariff-impacted items, our buyers have sourced a number of alternative great value items, including seasonal food, health and beauty, and live goods. In many cases, these items are produced in the U.S. and are largely unimpacted by tariffs. The supply chain has remained stable, and our merchants feel very good about our inventory position.

By optimizing our inventory flow and reducing some of the higher inventory levels we built up a year ago in the face of greater supply chain uncertainty at that time, we've been able to improve working capital and lower the labor required to manage inventory without impacting in-stocks or sales. Finally, in terms of upcoming releases, we will announce our December sales results for the five weeks ending Sunday, January the 4th, on Wednesday, January the 7th, after market close. That concludes our prepared remarks, and we'll now open the line up for questions.

Thank you. And we'll now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, press star one a second time. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. To be able to take as many questions as possible, we ask that you please limit yourself to one question. Again, it is star one to join the queue. And our first question comes from the line of Michael Lasser with UBS. Your line is open.

Good evening. Thank you so much for taking my question. Ron, one of the observations that the market has is under your tenure, Costco's had a greater willingness to move with speed, embrace technology, and different modes of retail and change a bit more than in the past. Is that a fair conclusion? And given the benefits of these actions that you're taking, which is greater productivity and efficiency, would you be willing to continue to let the financial benefits fall to the bottom line, or do you see a greater need to reinvest back in the business in areas like price to continue to drive the top line? Thank you very much.

You're welcome, Michael. Technology and bringing the company along has been a focus for several years. We've had to spend. A couple of years ago, we really focused on our fundamental base systems and our core systems behind the scenes that will allow us to build for the future.

And so we're now coming to a fruition where we're starting to see the benefits of that hard work of all the backroom systems that we had to build that are now coming to light and coming to the front face for our members. We feel that technology is going to be part of the big part of our future. I think it's equally as important as all of our other initiatives that we have out there, but we will never succumb to not being the best price and driving prices down for our members. That's what Costco is known for, and that will always be our leading mantra.

And our next question comes from the line of Christopher Horvers with JPMorgan. Your line is open.

Thanks. Good evening, guys. So a quick follow-up on the latter and then the former question and then a second question. So as you think about results recently, they're strong by absolute standards. I think the market holds you to very high standards. Is there any concern that you see on the traffic side where there's more of an impetus to invest in price? And then secondly, it looks like executive members per week grew at an accelerated pace from 4Q to 1Q. How are you looking at that in terms of the overall benefit of extending the hours, both in terms of the lift that you're seeing in sales, and is this also driving accelerated sign-ups? Thanks very much.

Yeah, thanks for the questions, Chris. First of all, I guess on your point around sales and overall sort of membership growth in the business, I think from our perspective, we look at it very much over the last really six to 12 months.

And when we look at the sort of trends and step back from what we're seeing with the member, there's a lot of consistency. Actually, overall, I think we've shared over the last couple of quarters, when we talk about what members are looking for, they're looking for value and for quality and for newness. And I think we've done a great job. Our buyers and operators did a great job of bringing that to our members. And when you look at month by month, there's definitely been some lumpiness in the individual monthly sales results that we've posted, but a lot of that has been to do with whether it was uncertainty around tariffs one month to another or port strikes that we had to cycle.

If you sort of take a step back and look at the last seven months that we've reported and the last two quarters, our average sales have been around that 6.5% growth. We had 6.4% comps adjusted for gas and FX in Q4. We had 6.4% Q1 this quarter. Actually, if you look at every individual month, there was only two months in that last seven months that were outside of the range of 6%-7%. So I think sometimes there's a bit of fixation on individual month or one particular point of data, but actually when we look at what we're seeing with the overall sort of patterns of how members are shopping and how they're behaving, we've seen a very sort of consistent pattern and a consistency in the results.

Our goal is to really continue to make sure we're delivering on that value, quality, and newness and ensure that we continue to see that growth in membership count, in their frequency of visiting, and in the items that they're putting in the basket. And generally, when you look across whether it's non-foods, food and sundries, and fresh, we've seen consistency in performance and growing market share in those areas. So we'll continue to focus on making sure we're delivering on that value, but feel good about the overall sort of consistency and the results that we've been seeing. I think the second part of your question maybe was around executive membership. And yeah, I think we've been very pleased with the membership response to the extended operating hours.

And also, you may remember we added $10 per month as an extra benefit for executive members who shop on Instacart. The extended opening hours that we did were certainly a major benefit for our executive members having an extra hour in the morning on most days to shop the warehouse, but we also added an extra hour on a Saturday evening for all of our members. And if you think about the earlier hours, it often extends the total shopping of members in the warehouse. So it spreads out the traffic, if you like, to make the experience better for all our members. So we've felt very positive about the change that we've seen. It's certainly been well received by members. We've seen a really nice uptick in executive upgrades, to your point.

It gets harder to track the spend uplift because the further away from the change you go, it's more difficult to sort of parse the differences that are happening in the impact on sales. But we still think that sort of 1% lift was a reasonable kind of view of what we think the impact was. And of course, as I mentioned earlier, you see sort of different puts and takes that I would sort of if I look at our overall sort of sales trends, I think I look at it as it's probably offset some of that cycling of gift cards and gold that we were expecting at this time of year. And we've been able to maintain that overall sales growth even with those impacts.

And our next question comes from the line of Simeon Gutman with Morgan Stanley.

Your line is open. Hey, Ron. Hey, Gary. My question is on how you're doing. Warehouse openings in the U.S., I think we're going to get to the highest number, something like 20 years next year. So do you do anything different from a membership perspective? I know we're lapping some of the short-term promotions that you did on membership. Is there anything you do different as you approach next year?

No, I don't think so. Next year's openings will be a good mix of some infills in established markets, and we still have some opportunities in some new markets. And so several of the infill locations don't result in a whole lot of sign-ups, but really drive a lot of top-line sales because it really addresses the frequency aspect of things.

And then the new markets that we've done several of those this year, and we have a few more slated for next year of markets that we may have been a little reluctant to go into. We've got much greater confidence at this point, and we'll garner a much better new sign-up approach in those markets as well. So a lot of continuing on what we've done before, but some different type of scenarios as we move forward in the U.S.

And our next question comes from the line of Oliver Chen with TD Cowen. Your line is open.

Hi. Thanks, Ron and Gary. On the technology side, it's been really exciting. As we think about retail media, there are plenty of companies that really want to work with you deeply on digital advertising. We'd love your thoughts there. And also, as you approach the marketplace in a customer-centric way, we'd love to have your thoughts on that development. And finally, AI and gas. AI has so many applications across the customer experience as well as employees and inventory management. What's on your roadmap for how that will innovate your business going forward? Thank you.

Thanks for the questions, Oliver. Yeah, I'll take the retail media question first. Yeah, we've talked about retail media a few times now on the calls, and I definitely believe that it's a meaningful opportunity for us. I always like to start the conversation on retail media, though, to remind everybody that we have a pretty large alternative profit business that many other retailers would define that way today. And I called out a couple of them on the call today. Outside of financial services, we have a large travel business.

We have a traditional sort of media revenue business that we generate meaningful dollars today. And both of those were actually travel and the sort of marketing and media revenue were tailwinds to our business in the quarter. So there's a number of strengths that we have today in that space that are part of our model that I think showed through in the ability to keep investing in the member and still expanding our operating margins during the quarter. That being said, we think of retail media as a slightly different opportunity from those because it really is about tapping into that marketing spend that many of our suppliers are investing in other places to drive their marketing awareness and drive return on ad spend. We are in the early innings.

I would still say of retail media, we've been building out, as Ron alluded to earlier, the sort of data and tech platform that allows us to execute personalization at scale. And I think for us, the first priority with personalization is to deliver a better member experience, is to deliver more targeted, relevant messaging so we drive more items in the basket, more visits to the warehouse, more visits online. And as you do those things, it just creates an even more compelling value proposition for our media partners. While we're building and executing on that capability, we've been introducing some media activity on third-party sites. I think of that as being you may have seen you have the Costco Auto Program that will run on digital TV. And we've done some targeted MVM amplification campaigns with some of our CPG partners that have been very successful as well.

We also recently launched advertising on our gas pumps as a new channel for us as well around new media opportunities. So I think the headlines would be we're seeing some early success, but it's still very much an opportunity in the future on the roadmap for us. And a bit like Ron mentioned earlier, all of our focus is on how do we drive more value for the member. So as you might expect, the vast majority of the value created here will reinvest in the member to drive down prices and value and increase sales. And we actually think that's a real advantage with the national brand partners that we work with on media because they know that we're committed to really driving the flywheel and driving growth in their overall business.

And on the AI front, we're extremely excited about what the future holds for us.

I mean, we see many opportunities that are really business-driven and tangible, have great tangible business value for us. And you look at things like our procurement system as we are a global retailer and we buy from around the world, as well as supply chain, what it can do there, and just the tools that we've seen that this has improved our employees' work abilities and their skill sets as well as they do their day-to-day work. So we see a lot of value. We're very excited about the journey. We look at it in a two-phase approach that concurrently we're going to be focusing on member facing. How do we improve the experience for the member through AI? And then business basics. How do we continue to focus on the business basics? Our mantra is bring goods to market at the lowest possible price.

We think AI has a great aspect to that and really can help us become a much better merchant out there.

Our next question comes from the line of Chuck Grom with Gordon Haskett. Your line is open.

Hi, Gary. Hi, Ron. Nice quarter. In your report, your sales waterfall chart is impressive. The class of 2025, $192 million in sales versus $150 million in 2023. Can you help us think about the opportunity to continue to expand on this front and the steps you're taking to continue to improve productivity within the store?

We see a good horizon on expansion. We continue to tap the creativity. I mentioned just a couple of examples of things that we're doing differently.

We've got a project in Los Angeles where we're working with some developers that there's some affordable housing going above Costco just north of LAX. That project will open up in 2027. That would be a market that we could it's Baldwin Hills is where it's called. That would be a market we would never be able to go into and find 25 acres to build a Costco. It just wouldn't happen. So we're finding creative ways to get closer to our members and to relieve some pressure from some of our highest volume locations. Again, like I said, we continue to see some opportunities in markets that we would have questioned in the past due to maybe some competition is there, but we feel much stronger going in and attacking these markets.

So like I said in the early opening remarks, good runway for 30+ locations as we look forward for the next few years for sure, and a good combination of both type of openings, and international still presents some very good strengths for us in our recent Sweden opening, our second location in Sweden, our third in France, and we've got quite a few in Asia that are upcoming as well, so we feel really strong about our future expansion.

And Chuck, I think on the point on the growth per warehouse, I think Ron's final point there is a really important one around the balance that we're able to get, so we find with many of the U.S. and Canada warehouses where we're filling in, we can accelerate the sales very quickly because Costco is known, we're sort of filling capacity where maybe there's some very busy warehouses around.

So it really helps the economic model with getting returns from the quick acceleration in sales growth. And then in the international markets or places where we have less penetration of warehouses, it really drives a significant increase in new member sign-ups. So it's nice to have a balance between those two. The returns look a little bit different in how you get there, but they both generate strong return on investment in different ways, and they create a nice balance in the business overall as we grow.

And our next question comes from the line of Kate McShane with Goldman Sachs. Your line is open.

Hi. Good afternoon. Thanks for taking our question. The renewal rate softness sounded better than what you expected. Could you maybe talk to some of the things you did to try and offset the softness from the more digital members?

Sure. Yeah. You're exactly right. When we talked about the membership renewal rate last quarter, we'd shared that as a result of this change in mix around us adding more new digitally engaged members or signing up digitally to become a Costco member, what we've always seen with that group is that they're generally a bit younger. And generally speaking, they renew at a slightly lower rate. That's always been true, but there's a bigger number of them now coming into the base. So as they flow into the math model, it's impacting the overall renewal rate. And so I think you may have heard us talk last quarter.

We said, "We think, while that's sort of a mathematical fact, we think there are opportunities for us to be able to change that outcome by delivering more targeted and relevant communication to those members that have signed up digitally and are reaching that point in maturity where they're considering whether to renew or not to renew their membership with us." And so our membership team is really focused on delivering targeted, relevant messaging to engage those members to ensure they continue to see the value of the membership and really helping them see why there's significant value for them to continue to be members. And what you saw in this quarter was really some of the early work the team's done to engage those members and improve the renewal rate.

And obviously, it's early days, so we want to make sure that we can continue to build that momentum. But it's been encouraging to see the impact of those changes. And we were expecting, based on purely flowing through the sort of the renewal rate that we've seen before, to see a slightly higher decline in the quarter. And we were able to offset a part of that with the changes that we made in communicating with members.

And our next question comes from the line of Peter Benedict with Baird. Your line is open.

Oh, hey, guys. Thanks for taking the question. I want to ask about digital. Maybe if there's any metrics you guys can share with the success you're having, maybe how many, what percentage of the membership that's engaging with you digitally now versus before? I don't think I may have missed it, but any stats around Costco Logistics, how you're doing with delivery there? Thank you.

Sure. Thanks for the question, Peter. Yeah, we haven't typically talked about the percentage of members that are engaging with digitally. It does continue to grow, as you might imagine, as we're continuing to make enhancements to the website, to the app, and really as we're delivering more relevancy to members through those channels. And so we are continuing to see growth. We did share in the prepared remarks that traffic was up 24% during the quarter on the website, and it was up even higher than that in the 40%+ range on the app during the quarter. So we continue to be pleased with the momentum that we're seeing in digital engagement with our members.

And our expectation would be that digital sales, as we define it, would continue to grow at a faster pace over the longer term than our average sales overall as more members engage digitally and we're able to use some of those targeted personalized communication tools to really help members see the relevancy of all the offers that we have online, but also to use those channels to help drive higher engagement into the warehouse as well and really creating a seamless experience across the channels.

Very excited about what we have coming in the app. I mean, more engagement, more locking in the brick-and-mortar business with the virtual digital business as well. And as we continue to roll out enhancements, we've got pay ahead for the pharmacy coming. We've got ordering cakes and deli trays online coming.

So many of the things that we've heard from our members that could be a little bit clunky are now moving to a digital state, and we're seeing great adoption right out of the chute. So we continue to see some upside to the continued growth and the digital value of having the app and using the digital membership card, the Costco wallet. Those things have all got a very nice roadmap the next 12 months. And we see that number is going to hopefully continue to outpace the growth of the warehouse.

And our next question comes from the line of John Heinbockel with Guggenheim. Your line is open.

Hey, guys. So two real estate questions. A lot of opportunity internationally. What does the pipeline look like both in some of your European countries and Asia? I know it takes a while And then secondly, you mentioned remodels, which I don't think you haven't talked about too much. What is the remodel philosophy in the U.S.? How many do you do? What's the extent of that? What's the lift? I don't know how impactful that is. Thank you.

Do you want to? I can start. Good runway internationally. We see some good growth in Europe, especially in Spain and the U.K. We have got a lot of good things going on there. And we see that those two countries will be ramping up. We continue to see very, very good strength in Asia. And so that market, we see the next five years, we think that those projects do, like you mentioned, do take a little bit longer, but they're going to start coming to fruition. So we'll see a good balance.

We've been about 50/50, half of the expansion in the U.S. and half outside of the U.S., and now we're seeing even more opportunities in Canada and North America and Mexico, so a good balance, about half of the 30 should be outside the U.S. we see in the next five years. Expansions and relocations. We normally do about five to six relocations a year. The uplift is dramatic when we do these. We normally are moving a building that is underserving the market and goes into a larger facility, better parking. If we have a gas station, expanded gas, or we add gas to it, and a wide variety of uptake, to extreme 50%, 60% increases when you add a gas station and really add a lot of parking, to a 20% uplift to a building that had everything just got into a better facility.

So we strategically look at that. And then we are continuously investing in our current warehouses too to make sure that we're updating the fresh foods areas. We're bringing the new ancillary businesses in there. So it's a process we go through every year of planning ahead, and we look out several years and a good combination of all three: new locations, relocations, and taking care of the existing buildings that we're doing business in as well.

And our next question comes from the line of Rupesh Parikh with Oppenheimer. Your line is open.

Good afternoon. Thanks for taking my questions. So I just want to go back to the comments on SG&A leverage. So it sounds like this quarter higher healthcare costs prevented your team from leveraging costs. So just curious about the dynamics there. And then, as you think about productivity, just how do you think about the runway there? It sounds like it could continue for a few more quarters. Thank you.

Yeah. Thanks for the question, Rupesh. Yes. You've summarized it pretty well, actually, from how we looked at the quarter. If I just take a step back, there were kind of four main sort of headwinds or investments, if you like, that we had during the quarter when you think about the impact on the warehouses. The first, of course, is the investments that we make through our employee agreement each year. So that was the March 25 agreement. And that, on an incremental basis, was sort of mid-single digits headwind that the team had to kind of overcome in improving productivity. The second was, of course, the extended operating hours that we implemented in June.

And then you mentioned it that we had higher healthcare costs in the quarter. We've generally seen, of course, healthcare costs increasing. This was perhaps the first quarter where we've seen healthcare costs grow at a faster pace than our sales. So we saw a little bit of a headwind overall from healthcare costs in the quarter. And then we also had the four basis points impact from the tax charge that relates back to multiple years ago that we took during the quarter as well. So overall, we were one basis points negative on productivity. If we'd have not had the sort of sales and use tax charge that we had during the quarter and without the healthcare costs, we'd have been sort of a mid-single digit or so positive leverage during the quarter without those sort of factors.

Now, I would say as you look forward, we're still going to have, of course, the continued investment that we've already implemented around wages. So we have to continue to support those costs. We've implemented the extended opening hours. We think the operators have done a great job of absorbing that, as you've seen the last couple of quarters. The healthcare costs, that's something we're taking action to make sure that we're comfortable with the trends that we're seeing. But of course, there's possibilities those costs could continue to be higher in the future. We wouldn't expect to have the sort of four basis points impact that we had from tax. So I think when you take all those things and look at it going forward, we've historically said that we need to get to about mid-single digit sales to be able to leverage SG&A.

And I think with the work the team's done to offset extended operating hours, the work the team's done to offset the employee agreement, I think we're in that kind of ballpark. And actually, in the first quarter, had we not have had the adjustment for sales tax, I think we'd have actually seen some leverage during the quarter. So I think that's the way to sort of think about it overall.

And our next question comes from the line of Greg Melich with Evercore ISI. Your line is open.

Hi. Thanks. Gary, I think you mentioned that inflation was running similar. I just wanted to make sure I got the numbers right. It was up low single digits in general merchandise. Was food inflationary or not in the quarter? And how do you see that trending?

Yes. Food and fresh food and sodas and fresh, Greg, would have been slightly inflationary. So low to mid-single digits, no real change really from last quarter. There are quite a few puts and takes in there, as I mentioned in the prepared comments, that you've got a few of the commodities that would be inflationary right now when you look at items like beef and seafood and coffee. But then you've got produce, which is deflationary currently. And there are other items like eggs and cheese, which are still inflationary year-over-year, but at lower inflation than they were earlier in the year. So you've got kind of puts and takes that are offsetting each other, which really essentially sort of levels it all out at the same level as it was the last couple of quarters.

Would it be fair to say that most of the ticket growth in comp was driven by inflation?

I think there'd be a combination of both in there. We'd have and I remember for us, inflation for us, the way we measure it, would be it could be the members buying a bigger pack size, or it could be the members buying an upgraded item of newer electronic or appliance. So I think you kind of have to look at it. There's sort of probably a combination or there is a combination of some level of natural inflation on like-for-like items, some level of inflation of members buying bigger pack sizes and increasing the moving to the newer model, if you like, and then some level of unit growth as well in there.

Got it. That's great. Good luck and have a great holiday.

And our next question comes from the line of Edward Kelly with Wells Fargo. Your line is open.

Yeah. Hi. Good afternoon, Ron and Gary. I wanted to dig into total paid members. You've had remarkable growth over the last few years. Models obviously resonated. And 5% this quarter is still very good, but it has slowed a little over the last few quarters. I was wondering if you could just maybe discuss what you're seeing there. Is that more so in the U.S.? And then have you seen any stabilization in that? I think the math would kind of suggest that maybe exit rate lower than 5.2. So just thoughts there. Thank you.

Costco Wholesale (COST) Q1 2026 Earnings Call Transcript

Company Participants