Costco Wholesale reported a decent quarter Thursday evening, delivering just enough on the membership numbers that we identified as crucial ahead of the print. Total revenue in its fiscal 2026 third quarter increased 11.6% year over year to $70.53 billion, ahead of Wall Street expectations of $69.81 billion, according to estimates compiled by LSEG. Adjusted earnings per share (EPS) in the 12 weeks ended May 10 rose 15.2% to $4.93, in line with expectations, LSEG data showed. Membership fee income in the quarter grew 10.7% to $1.37 billion, slightly exceeding the FactSet estimates of $1.36 billion. The U.S./Canada membership renewal rate ticked higher. COST YTD mountain Costco YTD The stock was not doing much after-hours trading. Weighing the lukewarm print against the benefits to Costco that come with a consumer forced to seek out value, we’re maintaining our hold-equivalent 2 rating and $1,100-per-share price target. Bottom line It was not the best quarter, but far from bad. Paid members came up short at 82.9 million but grew 4.1% year over year. However, stability in membership renewal rates should help support the stock, which has dropped some 9% since hitting a 52-week high of just over $1,096 on May 19. Traffic growth decelerated sequentially, but comparable ticket size growth accelerated as consumers continued to seek out the best-in-class value Costco can provide, thanks to its membership, bulk-selling warehouse model, and record demand at the gas pumps. That means folks are doing a bit more of their shopping at Costco these days. On the post-earnings call, CEO Ron Vachris called out record gas sales as prices hovered around four-year highs on supply disruptions due to the Iran war. “All three, four-week fiscal periods of the quarter set successive all-time company volume sales records, with the final five weeks of the quarter becoming our top five volume weeks ever,” the CEO said. The demand was so strong that some high-traffic Costco locations needed multiple daily gas deliveries. We were also pleased to hear Vachris say that many members were first-time Costco gas buyers in the quarter. He added, “We believe this will drive even greater loyalty with these members in the future, as members who use our gas stations typically spend more with us in the warehouse.” Motorists flock to Costco when prices are high because the company sells gas at a discount. After filling up, they’re more apt to duck their heads into the warehouse locations to do a little unplanned shopping. Total comparable sales rose 9.8% in fiscal Q3, a material acceleration from the 7.4% growth in the prior quarter. Comparable sales, or comps, is a key metric for the retail industry that adjusts for new store openings and closings to ensure fair year-over-year comparisons. Comps were driven by a 2.4% increase in traffic and a 7.3% increase in ticket size. That sounds pretty fantastic, but unfortunately, that’s not the full story. On an adjusted basis, which strips out…
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