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Call sheet · Q2'26

Costco Wholesale (COST)

Q2'26 earnings call · held March 5, 2026 · compared with the Q1'26 call · management-credibility review
9/12
Disclosure score
2 medium, 5 low flags
Financial quality
Bottom line
The sleeper story is renewal rate stabilization - they're solving their biggest strategic risk faster than expected as digital member retention programs show early success. The headline margin expansion story misses the real dynamic: core-on-core margins are strong at +22bps, but mix shift toward lower-margin pharmacy and e-commerce is accelerating and will pressure reported margins going forward. The binding constraint isn't demand or capacity - it's their ability to track and manage tariff impacts, which they admitted has become 'challenging.' Ron's quote 'complexity of tariffs made it challenging to track the exact impact' is jarring from a company known for operational precision. My view changes if they can't restore tariff cost visibility by next quarter or if renewal rates start declining again despite the retention programs.

The 30-second version

  • Renewal rate stabilization is the sleeper story everyone missed
  • Core-on-core margins expanded 22bps but total core margins barely budged
  • They quietly stopped giving specific tariff impact numbers

What changed this quarter

MetricQ1'26Q2'26Change
Net Sales$65.98B (+8.2% YoY)$68.24B (+9.1% YoY)+90bps acceleration
Comparable Sales (adj)6.4% (6.4% adj)7.4% (6.7% adj)+100bps acceleration
Net Income$2.001B (+13.6% adj)$2.035B (+13.8% YoY)Steady double-digit growth
EPS$4.50 (+13.6% adj)$4.58 (+13.9% YoY)Consistent growth
Membership Fee Income$1.329B (+7.3% ex-fee increase)$1.355B (+7.5% ex-fee increase)+20bps acceleration
Total Paid Members81.4M (+5.2% YoY)82.1M (+4.8% YoY)-40bps deceleration
Executive Members39.7M (+9.1% YoY)40.4M (+9.5% YoY)+40bps acceleration
U.S./Canada Renewal Rate92.2% (-10bps QoQ)92.1% (-10bps QoQ)Stable decline rate
Gross Margin (adj)11.32% (+4bps YoY)11.02% (+11bps adj YoY)Solid expansion
Core-on-Core Margin+30bps YoY+22bps YoY-8bps moderation

Accountability tracked

8 new promises made4 narrative shifts flagged6 prior promises scored
Inside the full report
The complete write-up covers the full promise ledger with kept/missed calls, disclosure-quality scoring, the metrics-vanished check, verification items, and the questions to ask next quarter.
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Scores, kept-promise rates, and flags on this site reflect the author's opinion, applying a stated methodology to statements management made on public earnings calls. Informational and educational purposes only - not investment advice, a recommendation, or an offer to buy or sell any security. Sources believed reliable but not guaranteed; the author may hold positions in the securities discussed.

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