Costco Q1 2026 Earnings Call

Summary

Costco reported strong Q1 2026 results with net income of $2.001 billion ($4.50 per share) and net sales of $65.98 billion, representing 8.2% growth. The company opened 8 new warehouses during the quarter, bringing the total to 921 worldwide. Key highlights included 6.4% comparable sales growth, 14% increase in membership fee income to $1.329 billion, and strong digital sales growth of 20.5%. The company saw traffic increase 3.1% with average transaction size up 3.2%. Costco continues investing heavily in technology and AI implementation, with early successes in pharmacy inventory management achieving 98% in-stock levels and prescan technology improving checkout speeds by up to 20%. The company is expanding its digital capabilities with personalization features and improved member communications. Management noted some challenges with renewal rates from younger, digitally-acquired members but reported early success in targeted retention efforts. Looking ahead, Costco maintains plans for 30+ warehouse openings annually and expects continued strong performance across all business segments while maintaining its focus on delivering the lowest possible prices to members.

Key Points

• Opened 8 new warehouses in Q1, bringing total to 921 worldwide
• Strong comparable sales growth of 6.4% with traffic up 3.1%
• Membership fee income increased 14% to $1.329 billion
• Digital sales showing strong momentum with 20.5% growth
• Implementing AI and technology improvements for better efficiency
• Executive membership upgrades accelerating with 39.7 million paid members
• Inflation remained relatively consistent across categories
• Strong performance in fresh foods, nonfoods, and pharmacy divisions

Action Items

• Continue rolling out prescan technology to more warehouses
• Deploy AI tools in gas business for inventory management
• Implement pay-ahead pharmacy ordering and online cake/deli ordering
• Continue targeted communications to improve digital member renewal rates
• Expand real estate team to support 30+ warehouse openings per year
• Complete 5 warehouse relocations planned for fiscal 2026

Decisions

• Revised net new warehouse openings for fiscal 2026 down to 28 due to delays in Spain
• Maintained focus on 30+ net openings per year for future years
• Continued investment in technology and digital capabilities
• Kept membership renewal rate improvement initiatives in place
• Maintained strategy of being first to lower prices for members

Participants