Costco closed out fiscal 2026 Thursday evening with a genuinely good quarter — and the stock moved lower in pre-market trading.

That response isn’t a verdict on the results. It reflects two things: investors already knew most of the top line, since Costco reports sales monthly, and the parts they didn’t know contained one clean beat, one quiet deceleration, and one nonrecurring benefit that the company disclosed with unusual transparency.

Net income reached $3.0 billion, up 14.9%, with adjusted earnings of $6.60 per share, up 12.4% and ahead of the $6.48 Zacks Consensus Estimate. Net sales of $93.9 billion rose 11.2%, capping a fiscal year in which sales reached $297.2 billion.

The Footnote That Matters

Costco disclosed that its results “included a nonrecurring benefit of $0.15 per diluted share related to IEEPA tariff refunds received in the quarter, less partial reinvestment of those refunds.” Reported diluted EPS was $6.75, up 15.0%. Excluding that benefit, net income grew 12.3% and EPS grew 12.4%.

Do the arithmetic and underlying EPS lands near $6.60 — still above consensus, but a much slimmer beat.

This is the sixth major retailer this season whose reported profits were flattered by the Supreme Court’s February decision striking down the IEEPA tariffs. Walmart booked $2.9 billion, Target $994 million, Home Depot $730 million, TJX $331 million, and Abercrombie roughly $100 million.

Costco’s disclosure is among the cleanest of the group — quantified per share and stripped out of the core margin calculation so investors can see through it. Oppenheimer’s Rupesh Parikh warned before the print that core earnings might fall short of consensus once refunds were backed out. He was nearly right: the underlying beat was slim.

Membership Fee Growth Is Decelerating Sharply

Here is the number that deserves the most attention, and it explains the tepid reaction better than anything else.

Membership fee income of $1.85 billion grew 7.3%, or 7.7% excluding currency. That is a marked slowdown: the same line grew 14% in last year’s fourth quarter, nearly 14% through the first half of fiscal 2026, and 10.7% in the third quarter.

The cause isn’t a mystery. The U.S. and Canada fee increase that took effect in September 2024 has now almost fully phased through, since Costco recognizes fees over each member’s annual term. What matters is the scale of the line involved: membership fees were roughly $5.3 billion in fiscal 2025, about half of the company’s $10.4 billion in operating income. A high-margin, high-visibility profit stream decelerating from 14% to 7% growth is a material change to the fiscal 2027 earnings algorithm.

The Membership Quality Story Is Excellent

That said, the underlying membership health improved, and this is the genuinely encouraging part of the release.

The U.S. and Canada renewal rate ticked up to 92.3% from 92.2%, and the worldwide rate rose to 89.8% from 89.7%. Both mark a second consecutive sequential improvement after several quarters of drift, which resolves the question hanging over the stock going in: the stabilization is real, not a one-quarter blip. Members absorbed the higher fee and stayed.

Paid memberships reached 84.1 million, up 3.8%, with total cardholders at 150.4 million. Executive memberships hit 42.3 million and now account for 75.6% of sales — the highest-value cohort continuing to expand its share of the business.

Traffic, Not Price

The composition of the comp is the best news in the report for anyone trying to read the consumer.

Total comparable sales rose 9.4%, or 6.7% excluding gasoline and currency. Critically, comparable traffic grew 3.3% while adjusted ticket also rose 3.3% — a balanced split between more visits and larger baskets. In the U.S., adjusted comps rose 7.2% on traffic of 3.2% and ticket of 3.9%.

That matters because traffic has been the scarce commodity across retail this season. Home Depot’s transactions fell 1.0%. Walmart’s traffic growth halved to 1.5%. Costco grew visits 3.3% while simultaneously cutting prices on Kirkland Signature staples. Gaining traffic while lowering prices is the clearest possible evidence of share capture.

Digital remains a standout: digitally enabled comparable sales rose 19.5%, with e-commerce site and app traffic up 30%.

Margins Held, and the Core Improved

Gross margin came in at 11.02%, down 11 basis points reported but up 20 basis points excluding gasoline. The figure worth isolating is core-on-core margin, which improved 18 basis points excluding the tariff-refund benefit. That is real underlying merchandise margin expansion, not an accounting artifact. SG&A improved 27 basis points to 8.94%.

Costco ended the year with 939 warehouses and plans to reach 967 in fiscal 2027 — 28 net new openings, an acceleration from the 25 added this year.

What It Means for Retail

Three conclusions follow. First, the value channel is still winning. Costco (COST Quick QuoteCOST - Free Report) grew traffic 3.3% in a quarter when most of retail could not grow it at all, and it did so while investing in lower prices. The consumer is intact but disciplined, and continues to consolidate spending toward operators with genuine price authority.

Second, the tariff-refund distortion is nearly universal, and investors should assume it is present in any fourth-quarter retail margin comparison. Costco handled the disclosure well. Not every retailer has.

Third — and this is the read-through most likely to be missed — subscription and membership revenue across retail is facing a lapping problem. Costco’s fee increase is now in the base. Walmart’s membership income grew 17% and Target’s Circle 360 more than 40%, but those programs will face the same math eventually. The high-margin flywheel that has justified premium multiples across the sector gets harder to sustain once the easy comparisons are gone.

Bottom Line

This was a good quarter from an exceptionally well-run company. Traffic grew, renewal rates improved for a second straight quarter, core margins expanded, and the store-opening pace is accelerating.

But at roughly 40 times forward earnings, Costco is priced for more than “good.” The stock entered the print about 17% below its May peak, and a 15% EPS gain that becomes 12.4% without a one-time refund — paired with membership fee growth halving — is not the catalyst required to re-rate a premium multiple higher.

The fundamental case is entirely intact. The valuation case still needs the fiscal 2027 earnings algorithm to prove itself without the fee-increase tailwind. Expect analysts to spend the coming weeks recalibrating exactly that, and expect the stock to trade sideways until they do.