Costco Faces Its Most Important Earnings in Years: Tariffs, Membership Risks, and a Surprise Setup

Costco enters tonight's earnings release with a rare combination of strong fundamentals and a strangely defensive market tone. Shares have underperformed the broader market this year—down about 3 percent versus the S&P 500’s 16 percent gain—and sentiment is the most cautious analysts have seen in years. The company has already preannounced its three months of revenue, as it typically does, but that hasn’t settled nerves. Instead, investors are going into this print focused on comps, margin resilience, the lawsuit filed against the Trump administration over tariffs, and questions about whether renewal rates have finally peaked. With the stock down roughly 15 percent from February’s all-time highs and valuations still rich at ~43–45x forward earnings, expectations are both low—and strangely consequential.

First, the top-line backdrop is already known. Costco reported Q1 net sales of $65.98 billion, almost exactly in line with consensus and well-telegraphed through its customary monthly updates. November sales came in at $23.64 billion, October at $21.75 billion, and September at roughly $26.6 billion, with U.S. comparable sales consistently running in the mid-single-digit range. Comps ex-gas and ex-FX rose +5.8 percent in November and +5.9 percent for Q1 overall, while total comps hit +6.4 percent. Categories like fresh foods and sundries held up well with MSD/HSD performance, and nonfoods remained solid thanks to jewelry, gift cards, and seasonal inventory. Truist captured the market’s thinking succinctly: business trends remain healthy, but at a ~45x multiple, investors want more than “solid.”

EPS expectations sit around $4.24–$4.28, with revenue projected near $67.1 billion—an ~8 percent year-over-year increase. Analysts have nudged estimates upward over the last three months (11 upward EPS revisions vs. seven down), suggesting confidence in some degree of upside. But Costco’s stock has struggled on recent prints, and Oppenheimer notes that sentiment is unusually negative—partly because the shares pulled back after reaching stretched valuations, and partly because investors fear margin pressures from tariffs and mix shifts.

That brings us to one of the most unusual storylines heading into an earnings report: Costco’s lawsuit against the Trump administration over tariffs imposed via the International Emergency Economic Powers Act (IEEPA). The company is seeking a full refund of duties paid under the law, arguing that the act does not authorize the president to impose tariffs. With the Supreme Court now reviewing the legality of Trump’s tariff framework—and both conservative and liberal justices expressing skepticism about the government’s defense—this has become a major swing factor for Costco’s future cost structure.

Costco hasn’t disclosed exactly how much it paid in tariffs, but U.S. importers overall have paid nearly $90 billion under IEEPA-based duties. The company previously noted that about one-third of its U.S. products are imported, with China representing about 8 percent of total U.S. sales. CFO Gary Millerchip has repeatedly stated that Costco attempted to maintain member value by not passing along tariff-related increases on key staples—fresh produce being the most cited example—meaning Costco has been absorbing margin pressure for years. If the Court strikes down the tariffs, Costco could receive a sizable refund, and more importantly, a structural margin boost. If the Court upholds them, management must continue mitigating costs through supplier negotiations, country-of-origin shifts, and global consolidation of buying power.

Investors will be laser-focused on tonight’s commentary around this case—not because Costco’s near-term earnings hinge on it, but because it influences whether a special dividend or stock split becomes more likely. OPCO flagged this dynamic clearly: a tariff refund would free up capital and clear the way for shareholder-friendly actions, whereas prolonged uncertainty may keep management cautious.

Membership dynamics are another major storyline. Renewal rates ticked down to 89.8 percent from 90.2 percent last quarter—something UBS labeled the steepest quarterly decline in 15 years. Management attributes this entirely to mix shift: online sign-ups tend to renew at lower rates. While that explanation is reasonable, investors want proof this is a temporary phenomenon. Membership fee income is one of Costco’s most predictable profit engines; any perceived instability generates outsized anxiety. Analysts expect management to reaffirm confidence that renewal rates will stabilize as digital cohorts mature, especially as auto-renew adoption rises.

Beyond those headline concerns, investors are watching a handful of operational themes that may influence how the stock trades post-print:

• Warehouse expansion – Costco plans to open 35 new locations in FY26 (vs. 27 in FY25), signaling continued confidence in domestic and international opportunity. • Margin performance – Fresh food, sundries, and nonfood categories have supported steady margin gains, and analysts will be watching whether supply chain efficiencies and Kirkland Signature penetration continue to offset inflation and tariffs. • Digitally enabled sales – Costco has shifted to reporting digitally enabled comps, reflecting a more omnichannel view. E-commerce comps were +13.6 percent last quarter, and investors want to see that hold as consumers remain budget-constrained. • Consumer health – As a bellwether for value-seeking shoppers, Costco’s trends often front-run broader retail data. Traffic and ticket size in Q1 will be read as proxies for holiday-season health. • Peer read-through – Walmart posted a very strong quarter, raising guidance and seeing e-commerce accelerate. Analysts view Walmart as a positive indicator for Costco demand, particularly among higher-income households trading down.

Valuation also plays a role in tonight’s setup. Even after the pullback, Costco’s 43–45x forward multiple remains elevated relative to peers and the market. That high bar means “in-line” results may not be enough; investors want reaffirmed confidence in share gains, resilience in membership economics, and transparency around tariff outcomes. On the flip side, the skepticism may actually help: OPCO views expectations as unusually low, calling this one of the best risk/reward setups Costco has had in months.

The preannounced sales data already shows healthy consumer demand. The core comps are solid. Membership remains robust despite mix noise. And the tariff lawsuit introduces an unconventional—but potentially powerful—new catalyst.

If Costco can deliver a clean quarter, provide reassurance around renewal rates, and offer credible commentary on tariffs and margins, this could be the moment the stock resets—and possibly reclaims its leadership mantle in 2026.