Costco Q1 Strength, Membership Surge Fuels COST Now

Introduction

Costco Wholesale (COST) entered 2026 with tangible momentum: a strong fiscal Q1 performance, rising membership income, and a slate of operational upgrades aimed at improving throughput and member retention. At the same time, intensified competition — notably Sam’s Club’s rapid expansion in China — highlights an area investors should monitor closely. This update synthesizes the concrete developments that directly affect COST stock and what to watch next.

Q1 Results: Numbers That Matter

Costco reported fiscal Q1 net sales of about $66 billion and earnings per share near $4.50, beating several sell-side estimates and nudging COST stock higher shortly after the release. Key drivers behind the results were solid comparable sales growth, an uptick in traffic and larger average tickets, and a notable jump in membership revenue.

Membership dynamics

Membership fees climbed to roughly $1.33 billion for the quarter, supported by paid households of approximately 81.4 million and an executive tier count near 39.7 million. Executive members continue to drive a disproportionate share of spend — executive-level households accounted for roughly three-quarters of total sales during the period. Renewal rates remained near historic highs in the U.S. and Canada (above 92%), and only edged slightly lower outside North America, reflecting robust loyalty despite rising digital enrollments.

Digital and traffic trends

Digitally enabled comparable sales surged, with website traffic up sharply and digital features contributing meaningfully to overall growth. Costco’s e-commerce is not yet the dominant sales channel, but the firm’s improvements in site performance and checkout flow are raising online conversion and encouraging more members to enroll and renew via digital channels.

Operational Changes: Efficiency and Membership Controls

Beyond headline results, Costco is implementing several operational tweaks intended to improve member experience and store efficiency. Notable initiatives rolling out in 2026 include:

• Expanding warehouse count with about 28 new locations planned, a modest reduction from earlier targets as international timing shifts.
• Introducing advanced self-checkout setups where staff pre-scan carts to speed lanes and reduce friction.
• Deploying membership verification scanners at food courts and entry points to enforce membership-only access and reduce leakage.
• Enhancing digital auto-renewal prompts and personalization to stabilize retention as more sign-ups occur online.
• Boosting local sourcing for Kirkland Signature items to shorten supply chains and protect margins.

These moves are designed to protect the core value proposition — low prices for members — while squeezing modest efficiency gains that can flow to earnings over time.

Competitive Signal: Sam’s Club’s China Push

One of the clearest near-term competitive developments is Sam’s Club’s rapid expansion in China, where its store count has grown sharply and top locations now generate material revenue. Sam’s Club has leaned heavily on premium tiers, fast e-commerce fulfillment (with some city deliveries measured in minutes), and deep integration with local platforms — forcing Costco to consider both speed of rollout and localized digital strategies.

For COST shareholders, this is a regional challenge: Costco’s presence in China remains limited in comparison, so international execution and differentiation on product mix, pricing, and digital convenience will be important to preserve share and growth opportunity.

Short-Term Events and Investor Takeaways

Operational calendar items also had short-term effects: Costco’s warehouses were closed for 24 hours on January 1, a rare full-chain pause that temporarily shifted discretionary foot traffic. While short-lived, such events highlight how timing and access can affect quarterly cadence.

What to watch

• Membership renewal trajectory as digital enrollments rise and auto-renewal features roll out.
• Execution speed on self-checkout and membership verification technology that can improve throughput and shrink operating expense over time.
• International expansion responses, especially relative to Sam’s Club’s gains in China and other Asian regions.
• Quarterly digital sales comps and conversion metrics to confirm that online growth sustainably complements in-warehouse spending.

Conclusion

Costco’s recent quarter and operational initiatives reinforce the resilience of its membership model: rising membership revenue, high renewal rates, and stronger digital engagement all support near-term fundamentals for COST stock. However, regional competitive moves — particularly Sam’s Club’s aggressive build in China — create a clear execution test for Costco’s international strategy. Investors should focus on renewal performance, digital enrollment trends, and whether in-store technology rollouts translate into measurable margin gains in upcoming quarters.