COST

Costco delivered a solid Q3 FY2026 with net sales of $69.15 billion, up 11.6% year-over-year, and EPS of $4.93, up 15% from $4.28 in the prior year. The headline growth masks a more nuanced story: comparable sales excluding gas and FX grew a modest 6.6%, while traffic increased just 2.4% globally, a meaningful deceleration from the mid-single-digit growth the company has historically targeted. The quarter was dominated by an extraordinary gas business, where record volumes driven by Middle East supply disruptions and elevated oil prices created a significant tailwind. Management capitalized on this by widening gas margins to drive traffic and loyalty, while simultaneously investing in lower prices on everyday items like eggs and beef to defend core merchandising share. Gross margin ex-gas inflation improved 1 basis point, but core-on-core margins declined 9 basis points as Costco deliberately traded near-term profitability for member value and traffic, a strategic choice that reflects confidence in the durability of its value proposition but also signals management's awareness that traffic growth is slowing and requires active investment to sustain. Membership growth of 4.1% paid members and 7% organic membership income growth (ex-fee increase and FX) remains healthy, though the 4% figure represents the slowest pace in recent years, partly attributable to the absence of major new market openings in Asia that historically drove outsized sign-ups. The company's renewal rate stabilized at 92.2%