Costco Wholesale reported solid quarterly results on Thursday, slightly beating analyst forecasts on the key lines. While we would have preferred to see stabilized renewal rates in its key region, the retailer’s consistently strong sales momentum can’t be ignored. Total revenue in its fiscal 2026 second quarter increased 9.2% year over year to $69.6 billion, topping Wall Street expectations of $69.12 billion, according to estimates compiled by LSEG. Adjusted earnings per share (EPS) in the 12 weeks ended Feb. 15 rose 13.9% from the year-ago period to $4.58, beating the consensus of $4.56, LSEG data showed. With the results being mostly in-line, the stock wasn’t doing much in after-hours trading. Still, the start of 2026 has much kinder to Costco shareholders compared to the last six months of 2025, when shares registered their first back-to-back quarterly declines since 2022. For the year, the stock is up roughly 14%. COST 1Y mountain Costco’s stock performance over the past 12 months. Bottom line So, can the stock keep its run going and reclaim its high from the middle of last year? That’s the question we find ourselves asking Thursday night. On one hand, it’s hard not to be impressed with the 6% to 7% comparable sales growth the wholesale retailer has consistently put up month after month, and now quarter after quarter. The solid growth in both traffic and ticket sales tells us that the company is gaining market share in the highly competitive retail landscape. However, the thorn in our sides has been membership renewal rates, which for many quarters now have drifted lower. This slow drip hasn’t been an indictment on the value of a Costco membership, but rather a dynamic related to an influx of online sign-ups who probably don’t see the full appeal of a membership because they don’t go to the stores. The proof is in the comp sales growth. Still, Costco makes most of its money on membership fees, so if lower renewal rates create a slowdown in membership growth, it matters to how we view the stock. Declining renewals are why we trimmed this position late last year, though not at the best price. When we reviewed Thursday’s results, we were met with both joy and disappointment. The worldwide renewal rate finally stabilized, but the U.S. and Canada saw yet another downtick and it sounded like this problem will be with us for a few more quarters. Although management has yet to fully solve the online renewal piece, it’s clear that the technology investments being made in stores are improving the customer experience for warehouse shoppers. That keeps us encouraged about the long-term opportunity once the online dynamic is fully played out. On the earnings call, CEO Ron Vachris highlighted improving checkout speed and employee productivity through enhancements in mobile wallets, pharmacy pay ahead, and pre-scan technology, which enables an employee to start ringing up small-to-medium carts while shoppers are still in line. These improvements have…
Read More: We’re raising our Costco price target after a good but not great quarter.