In a retail environment where tariffs are squeezing margins, consumers are trading down, and discount shopping has become the dominant trend of 2026, one company keeps reporting numbers that make its competitors look like they are operating in a different economy. Costco Wholesale reports its second-quarter fiscal 2026 earnings on Wednesday, March 5, and the preview reads like a highlight reel at a time when most retailers are managing expectations downward.
For the four weeks ending February 1, Costco reported net sales of $21.33 billion, a 9.3 percent increase from the same period a year earlier. Comparable sales grew across every region, with notable strength in e-commerce channels. The trailing twelve-month revenue figure has climbed to $280.39 billion, placing Costco firmly among the five largest retailers on earth. And the membership fee engine that powers the entire business model just keeps getting stronger.
What Wall Street Expects
Analysts are projecting $69.22 billion in revenue for the quarter, representing 8.6 percent growth from the prior year. Earnings per share are expected to reach $4.53, an increase of 12.7 percent. Comparable sales growth is forecast at 6.5 percent, a figure that would represent acceleration from the trend line established earlier in the fiscal year.
Perhaps more importantly, membership fee revenue is expected to rise 11.6 percent to $1.33 billion. Costco implemented a membership fee increase in September 2024, raising the standard Gold Star membership from $60 to $65 and the Executive membership from $120 to $130. Fee increases are rare at Costco, occurring roughly every five to six years, and they historically have minimal impact on renewal rates. The company's membership renewal rate has consistently hovered above 90 percent in the United States and Canada, a loyalty figure that most subscription businesses would consider extraordinary.
The stickiness of Costco's membership model is not accidental. It reflects a business philosophy built around delivering such consistent value that canceling feels irrational. When members pay $65 or $130 per year for access, they have a built-in incentive to consolidate their spending at Costco to justify the fee. This creates a flywheel: more spending per member leads to higher revenue, which allows Costco to negotiate better prices from suppliers, which delivers more value, which keeps members renewing.
Why Costco Handles Tariffs Better Than Almost Anyone
The tariff environment that is causing heartburn for retailers like Best Buy, Target, and Dollar Tree presents a different challenge for Costco, and the warehouse giant is better positioned to absorb it for several structural reasons.
First, Costco's product mix is tilted heavily toward consumables, food, household supplies, and everyday essentials that are less exposed to import tariffs than consumer electronics or apparel. Approximately 60 percent of Costco's revenue comes from food and sundries, categories where domestic sourcing is more prevalent. The company sources a significant portion of its fresh food, bakery products, and Kirkland Signature branded goods from American suppliers, reducing its exposure to cross-border duties.
Second, Costco's private-label Kirkland Signature brand gives the company unusual control over its supply chain. Kirkland products, which account for roughly 30 percent of total sales, are manufactured to Costco's specifications by a network of contract producers. The company can shift production between facilities and countries more nimbly than retailers that depend on third-party brands with fixed supply chains. When tariffs increase the cost of importing a Kirkland product from one country, Costco can explore alternatives in a way that branded manufacturers cannot.
Third, the warehouse model itself provides a buffer. Costco operates on gross margins of roughly 11 percent, far lower than the 25 to 35 percent margins typical at conventional retailers. That sounds like a disadvantage, but it means there is less margin for tariffs to compress. Costco's profitability comes not from marking up products but from membership fees and operational efficiency. As long as members keep renewing and foot traffic remains strong, the business model works even if product margins tighten by a few basis points.
The E-Commerce Surge
One of the most encouraging trends heading into the March 5 report is the acceleration in Costco's digital business. E-commerce sales grew 20.5 percent year-over-year in the first quarter, driven by expanded delivery options, a larger online assortment, and the rollout of same-day delivery through partnerships with Instacart and Costco's own logistics network.
Historically, Costco was a laggard in e-commerce, content to let the warehouse experience do the selling while competitors invested heavily in digital platforms. The shift in strategy over the past two years has been notable. The company has invested in its website and app, expanded its online-exclusive product range, and introduced a curated marketplace model for bulkier items that do not fit the warehouse format.
Digital sales still represent a small fraction of total revenue, estimated at roughly 8 to 10 percent. But the growth rate suggests the company is capturing share from online-only competitors by combining the convenience of delivery with the pricing power that Costco's scale provides. For members who want Costco prices without the warehouse trip, the digital channel is becoming increasingly compelling.
The Trade-Down Beneficiary
The broader consumer backdrop is also working in Costco's favor. Bank of America's latest consumer research shows that middle-class spending growth has slowed to roughly 1 percent, and shoppers across every income bracket are making more trips, spending less per visit, and trading down to lower-cost alternatives. Costco is the natural destination for this behavior.
When families decide to buy groceries in bulk rather than shopping at conventional supermarkets, they end up at Costco. When they choose Kirkland Signature paper towels over Bounty, or Kirkland olive oil over a premium brand, they are trading down in a way that sends revenue directly to Costco's bottom line. The company has always thrived during periods of consumer belt-tightening because its value proposition becomes more, not less, attractive when budgets are tight.
This dynamic is reflected in the membership data. New member sign-ups accelerated in the first quarter, and the conversion rate from Gold Star to Executive memberships, which cost twice as much but offer 2 percent annual rewards on purchases, has been climbing. Costco's management has noted that Executive members spend roughly twice as much as Gold Star members, making each conversion a meaningful revenue multiplier.
What to Watch March 5
Beyond the headline numbers, investors should pay attention to three things when Costco reports. First, the trajectory of comparable sales growth in the United States. If the 6.5 percent consensus estimate is met or exceeded, it would confirm that the trade-down trend is accelerating in Costco's favor. Second, commentary on the tariff environment and any impact on Kirkland Signature product costs. Third, updates on international expansion, particularly in China, where Costco has been opening new warehouses to strong consumer response.
Costco's valuation is not cheap. At roughly 50 times forward earnings, the stock prices in a significant amount of future growth. But in a retail environment defined by tariff uncertainty, consumer anxiety, and margin compression, the market is willing to pay a premium for a business model that seems to get stronger when everything around it gets harder. Wednesday's report will test whether that premium is justified.
