Costco — research brief

# Costco — research brief

*Prepared 2026-10-13 for the Business Model Canvas Gallery (display #104). Independent educational project; not affiliated with Costco Wholesale Corporation. Not investment advice.*

**Company:** Costco Wholesale Corporation (Nasdaq: COST), Issaquah, Washington. Began operations in 1983 in Seattle. Operates membership warehouses and e-commerce sites. Three reportable segments: United States, Canada, Other International.
**Fiscal year:** Costco's own 52/53-week year ending on the Sunday nearest the end of August. **FY2026 = 52 weeks ended August 30, 2026**; FY2025 = 52 weeks ended August 31, 2025; FY2024 = 52 weeks ended September 1, 2024. Labeled with Costco's fiscal year — not converted to calendar years.

**Why FY2026:** the brief asked for the latest completed full fiscal year. Costco reported FY2026 results on Sep 24, 2026 (8-K) and filed its FY2026 Form 10-K on Oct 7, 2026, so FY2026 is the latest completed year; FY2025 is shown as the comparison year.

Labels: **FACT** = company filing / release · **SECONDARY** = press / third party · **INFERENCE** = our reading / arithmetic.

## Sources

1. Costco Form 10-K for fiscal 2026 (52 weeks ended Aug 30, 2026), filed Oct 7, 2026 — https://www.sec.gov/Archives/edgar/data/909832/000090983226000093/cost-20260830.htm
2. Costco Q4 and fiscal year 2026 results release (8-K Ex. 99.1), Sep 24, 2026 — https://www.sec.gov/Archives/edgar/data/909832/000090983226000084/costex9918-k92426.htm
3. Costco June 2024 sales release + membership fee increase (8-K Ex. 99.1), Jul 10, 2024 — https://www.sec.gov/Archives/edgar/data/909832/000090983224000036/costex9918-k71024.htm
4. Costco investor relations — https://investor.costco.com

## Full-year financials (FY2026 vs FY2025) — FACT [1][2]

| Item ($M) | FY2026 | FY2025 | Change |
|---|---|---|---|
| Net sales | **297,247** | 269,912 | **+10.1%** (10-K: "+10%") |
| Membership fees | **5,907** | 5,323 | **+11.0%** (10-K: "+11%") |
| **Total revenue** | **303,154** | 275,235 | **+10.1%** (INFERENCE: arithmetic) |
| Merchandise costs | 264,279 | 239,886 | |
| Gross margin on net sales | 32,968 (11.09%) | 30,026 (11.12%) | −3 bps (+10 bps ex gas inflation) |
| SG&A | 27,190 (9.15% of net sales) | 24,966 (9.25%) | −10 bps |
| **Operating income** | **11,685** | 10,383 | +12.5% (INFERENCE: arithmetic) |
| Interest expense | (145) | (154) | |
| Interest income and other, net | 711 | 589 | |
| Income before taxes | 12,251 | 10,818 | |
| Provision for income taxes | 3,025 (ETR 24.7%) | 2,719 (25.1%) | |
| **Net income** | **9,226** | 8,099 | **+14%** (10-K) / +13.9% arithmetic |
| Diluted EPS | $20.76 | $18.21 | |
| Operating cash flow | 15,825 | 13,335 | |
| Additions to property & equipment (CapEx) | 6,435 | 5,498 | |
| Cash dividends paid | 2,458 | 2,183 | |
| Share repurchases | 848 | 903 | |

Q4 FY2026 (16 weeks): net sales $93.9B (+11.2%); net income $2.998B ($6.75/share) incl. a non-recurring ~$0.15/share benefit from IEEPA tariff refunds (FACT [2]). Quarterly figures are context only — the atlas uses full-year figures.

INFERENCE (arithmetic): membership fees were ~1.9% of FY2026 total revenue but equal to ~51% of FY2026 operating income ($5,907M / $11,685M). Net income ≈ 3.0% of total revenue. Operating margin ≈ 3.9% of total revenue.

## Net sales by merchandise category (FY2026) — FACT [1] Note 11

| Category | FY2026 | FY2025 |
|---|---|---|
| Foods and Sundries | $116,788M | $109,564M |
| Non-Foods | $77,375M | $71,190M |
| Fresh Foods | $41,715M | $37,988M |
| Warehouse Ancillary and Other Businesses (gas, pharmacy, optical, food court, e-commerce, business centers, travel…) | $61,369M | $51,170M |
| **Total net sales** | **$297,247M** | $269,912M |

Ancillary & other grew $10,199M (+20%) led by gasoline and pharmacy; core categories +$17,136M (+8%). Gasoline = 11% of FY2026 net sales; 774 gas stations. Digitally-enabled sales = 11% of net sales; digitally-enabled comparable sales +21% (FACT [1]).

## Segments (FY2026 total revenue / operating income) — FACT [1] Note 11

| Segment | Total revenue | Operating income |
|---|---|---|
| United States | $219,823M | $7,647M |
| Canada | $40,561M | $2,107M |
| Other International | $42,770M | $1,931M |
| Total | $303,154M | $11,685M |

U.S. + Canada = 86% of net sales and 83% of operating income; California = 26% of U.S. net sales (FACT [1]).

## Comparable sales (FY2026, 52 weeks) — FACT [2]

Total company 8.4% (6.6% ex gas & FX); U.S. 8.2%; Canada 7.8%; Other International 9.8%; Digitally-enabled 20.9%. 10-K: comps +8% driven by +5% average ticket and +3% shopping frequency.

## Membership — FACT [1][3]

| (thousands) | FY2026 | FY2025 | FY2024 |
|---|---|---|---|
| Paid members | 84,100 | 81,000 | 76,200 |
| Household cards | 66,300 | 64,200 | 60,600 |
| Total cardholders | 150,400 | 145,200 | 136,800 |
| Executive members (of paid) | 42,300 | 38,700 | 35,400 |

- Executive members ≈ 50% of paid members (INFERENCE: 42.3/84.1) and ~75.2% of worldwide net sales (FACT [1]).
- Renewal rate at end of FY2026: 92.3% U.S. & Canada, 89.8% worldwide (FACT [1]).
- U.S. annual fee $65 (Gold Star / Business), incl. a free household card (FACT [1]).
- Effective Sep 1, 2024: U.S./Canada Gold Star, Business and Business add-on fees rose $60→$65; Executive $120→$130 ($65 base + $65 upgrade); max annual 2% Executive Reward raised $1,000→$1,250 (FACT [3]).
- Executive reward (generally 2% on qualified purchases) is booked as a reduction of sales: net reduction $3,383M in FY2026 (FY2025 $3,007M) (FACT [1]).
- Membership fees recognized ratably over the one-year membership; deferred membership fees $3,006M at FY2026 year-end (FACT [1]).
- Fee increase accounted for ~30% of membership-income growth in FY2026 (~40% in FY2025) (FACT [1]).

## Operations — FACT [1][2]

- 939 warehouses at Aug 30, 2026 (914 at Aug 31, 2025): 647 U.S. & Puerto Rico, 115 Canada, 43 Mexico, 37 Japan, 29 U.K., 20 Korea, 15 Australia, 14 Taiwan, 7 China, 5 Spain, 3 France, 2 Sweden, 1 Iceland, 1 New Zealand.
- FY2026: 28 openings incl. 3 relocations = 25 net new (18 U.S., 5 Canada, 2 Other International).
- Average warehouse ~148,000 sq ft; < 4,000 active SKUs per warehouse; 9,000–11,000 SKUs online.
- Buys mostly direct from suppliers; cross-docking depots; "often sell inventory before we are required to pay for it."
- Kirkland Signature private label: generally higher margins than national brands and a growing portion of sales (no % disclosed in the 10-K; we do not cite one).
- Citibank, N.A. is the exclusive U.S. co-brand credit card issuer; Costco receives royalties on outside purchases (FACT [1]).
- Costco Travel (U.S., Canada, U.K., Australia); e-commerce in 9 countries.
- Employees: 355,000 at end of FY2026 (U.S. 232k, Canada 58k, Other International 65k); ~95% in warehouses and distribution; ~5% unionized; average U.S. hourly rate ≈ $33.00 after a March 2026 top-of-scale +$1.00/hr raise.
- Balance sheet (Aug 30, 2026): cash $20.2B; merchandise inventories $19.3B; accounts payable $22.6B; total assets $89.0B; total debt ≈ $6.2B; equity $35.8B.
- Tariffs: paid ~$500M in IEEPA tariffs; refunds received after the Feb 2026 Supreme Court ruling (FACT [1][2]).

## Business model read — INFERENCE

- Engine: retail/DTC. Costco sells physical merchandise directly to members in owned/leased warehouses and online (~98.1% of FY2026 total revenue is net sales of merchandise and services), with membership fees (~1.9% of revenue) acting as a high-margin annuity that funds razor-thin merchandise margins (gross margin ~11% of net sales, SG&A ~9%).
- Flywheel: low prices + limited SKUs → high volume per warehouse → buying power and fast inventory turns → lower costs → lower prices → renewals and Executive upgrades.
- Profit concentration: membership fees ≈ half of operating income — the membership is where the margin is earned, merchandise is where value is delivered.

## Not found / not used

- No disclosed Kirkland Signature sales share in the FY2026 10-K → not quoted.
- No disclosed Executive membership revenue split → membership fees shown as one line.
- No valuation or market cap figures used.