Costco Cuts 2026 Openings; Tariff Lawsuit, Q1 Wins

Overview: Strong Performance Meets Tactical Slowdown

Costco Wholesale (COST) entered the holiday season with robust sales and membership metrics, yet management signaled a temporary pullback in physical expansion. The company reported a solid fiscal Q1 driven by digital momentum and higher membership income while reducing its 2026 store-opening target amid construction delays. At the same time, Costco initiated legal action over past tariffs — a move that could affect margins if successful. These concrete developments are shaping investor expectations for COST in the near term.

Key Q1 Financials and Membership Strength

Top-line growth and comps

For the 12 weeks ending in late November, Costco posted roughly an 8% year-over-year increase in net sales, approaching the mid‑$60 billion range. U.S. comparable-store sales expanded, reflecting steady traffic and basket inflation. Digital sales were notably strong—up more than 20%—which amplified total engagement and average order value.

Membership income and renewal rates

Membership fee income rose in double digits, with renewal rates north of 90% in the U.S. and Canada. Executive members continued to contribute disproportionately to fee income and sales, reinforcing the recurring-revenue backbone of Costco’s model. These subscription-style dynamics help smooth cash flow and underpin long-term valuation assumptions.

Expansion Slowdown and Capital Allocation

2026 openings trimmed

Management revised its 2026 new-store target down from 35 to 28 locations. The reduction stems from international construction delays—Spain cited as a notable example—and logistical timing rather than a strategic retreat. Costco is reallocating some capital toward remodels and technology upgrades, including self-checkout improvements and other in-warehouse efficiencies.

What the pause signals

Think of this as a brief detour rather than a route change: the company expects to return to a cadence of about 30 openings annually by 2027. In the meantime, investments in existing assets and digital capabilities could deliver better near-term returns per dollar spent than rapidly adding new doors.

Tariff Lawsuit: Potential Margin Upside

Legal action details

Costco has filed suit in the Court of International Trade seeking refunds for duties paid under prior tariffs and asking for an injunction against future collections while related Supreme Court matters play out. Costco is the major retailer taking this specific legal route publicly, making the case a focal point for potential industrywide implications.

Stake for investors

If successful, refunds could be accretive to margins and free cash flow; an injunction could prevent future duty headwinds. The legal timeline is uncertain, so while the claim is material, it is not an immediate earnings lever.

Competitive Ripples: Food Court and Sam’s Club

Holiday food sales and customer engagement

Holiday-period foodcourt volumes illustrated strong member loyalty—highlighted by hundreds of thousands of pizzas sold on Halloween and millions of pies in the lead-up to Thanksgiving. These kinds of high-volume, low-margin items act as loyalty drivers and in-warehouse traffic generators.

Rivals copying success

Sam’s Club has launched foodcourt items that mirror Costco favorites at lower price points, underscoring an intensifying tactical competition in-store experiences. While not existential, imitation of popular foodcourt offerings pressures Costco to continue innovating or risk minor share erosion in ancillary spend.

Implications for COST Stock

Investors reacted modestly to the earnings print, with a small after‑hours decline despite otherwise strong operational results—likely reflecting elevated valuation multiples and the temporary slowdown in store additions. Key near-term catalysts to watch include progress in the tariff litigation, updates to expansion guidance, and any signs that digital growth translates into sustained margin improvement.

Conclusion

Costco’s recent quarter reinforced the durability of its membership model and digital traction, even as the company pauses some new-store openings and pursues a high‑stakes tariff lawsuit. For shareholders, the combination of steady recurring revenue, measured capital reallocation, and possible legal upside creates a mix of steady execution and event-driven upside. These are tangible developments investors can monitor without relying on conjecture.