Costco sells groceries, household goods and services through membership warehouses and digital channels. In fiscal 2026, ended August 30, it generated $15.82 billion of operating cash, leaving $9.38 billion after spending on buildings, equipment and other long-lived assets. That cash covered dividends and buybacks and strengthened its ability to fund a larger expansion budget. The harder task is turning that investment into profitable purchases as growth in shopping visits slows.
Source: FY2026 Form 10-K, Item 7, pp. 26 and 29; consolidated cash-flow statements, p. 41.
Information cutoff: October 10, 2026. Annual comparisons below cover 52 weeks unless identified otherwise.
1. Sales grew across the business, but gasoline amplified the acceleration
Costco’s existing locations kept growing, while growth excluding gasoline-price and currency changes slowed. Customers visited more often and spent more per visit. New warehouses added another source of sales, but most of the increase came from locations already operating for more than a year.
Net sales rose 10.1% to $297.25 billion. Costco attributed $22.46 billion of the $27.34 billion increase to comparable sales—sales at established locations—and the remaining $4.88 billion to new warehouses. Shopping frequency rose approximately 3%, while spending per visit rose approximately 5%. The latter includes changes in prices and product mix; it does not measure the number of products customers bought.
The same business looked faster or slower depending on whether gasoline prices and currencies were included. These adjustments remove specified outside price effects, rather than all inflation.
| Sales measure | FY2025 | FY2026 |
|---|---|---|
| Net sales growth | 8.1% | 10.1% |
| Comparable sales growth, reported | 5.9% | 8.4% |
| Comparable sales growth, excluding gasoline-price and currency changes | 7.6% | 6.6% |
| Shopping-frequency growth, rounded | 5% | 3% |
Sources: Costco FY2026 Form 10-K, Item 7, pp. 25–26; FY2026 operating results, September 24, 2026, annual comparable-sales table; FY2025 operating results, September 25, 2025, annual comparable-sales table; FY2025 Form 10-K, Item 7, p. 26. See the FY2026 Form 10-K.
Gasoline’s average selling price rose 12%, adding $3.50 billion to annual sales. Costco also sold 7% more gasoline by volume, adding $1.91 billion. Currency translation added another $1.33 billion. The volume increase is evidence of greater fuel demand at Costco; the price increase raises sales dollars without the same implication for shopping activity.
Growth extended beyond fuel. Foods and sundries sales rose 6.6%, non-food merchandise rose 8.7%, and fresh foods rose 9.8%. Warehouse ancillary operations and other businesses grew 19.9%, led by gasoline and pharmacy. Those businesses supplied $10.20 billion of incremental sales, compared with $17.14 billion across the three core merchandise categories.
Costco’s business model helps explain why broad sales growth matters. It buys in large quantities, offers fewer than 4,000 active items in a typical warehouse, and handles goods with relatively simple facilities and displays. More sales can spread the cost of running each building across more purchases. Costco also says its Kirkland Signature products generally sell below national-brand prices while earning higher merchandise margins. That gives the company a way to offer member savings and retain more profit on a sale, provided it maintains product quality and member trust. But slower growth in visits and adjusted comparable sales means the stronger headline growth rate should not be read as an equally strong acceleration in customer demand.
Source: FY2026 Form 10-K, Item 1, pp. 3–5 and 7; Item 7, pp. 23–26; Note 11, p. 64. Category growth rates are calculated from the disclosed annual sales.
2. Higher-tier memberships supported fees as member growth eased
Membership revenue grew faster than the member base because fee increases and Executive upgrades also contributed. Customers pay Costco for access to its prices and assortment. Executive members pay more and receive purchase rewards, giving Costco a reason to keep those members shopping frequently.
| Membership measure | FY2024 | FY2025 | FY2026 |
|---|---|---|---|
| Membership-fee revenue, USD millions | 4,828 | 5,323 | 5,907 |
| Paid memberships at year-end, millions | 76.2 | 81.0 | 84.1 |
| Executive memberships at year-end, millions | 35.4 | 38.7 | 42.3 |
Source: FY2026 Form 10-K, Item 1, p. 5; Item 7, pp. 26–27. Membership counts include a small proportion of memberships that expired without renewal within the preceding 12 months; they are not a count of continuously active households.
Paid memberships increased 3.8%, slower than the preceding year’s 6.3%. Executive memberships grew 9.3% and represented just over half of paid memberships at year-end. Executive members accounted for 75.2% of worldwide annual net sales. This gives upgrades substantial business importance, although the figures do not prove that upgrading itself causes members to spend more.
The September 2024 U.S. and Canadian fee increase was still flowing into reported revenue. Costco spreads a membership payment over its one-year coverage period. Management attributed approximately 30% of fiscal 2026’s $584 million fee-revenue increase to that price change, or about $175 million by calculation. The remaining growth reflects other factors, including sign-ups and upgrades; it is not a separately disclosed profit measure.
Renewal rates ended the year at 92.3% in the U.S. and Canada and 89.8% worldwide, unchanged from fiscal 2025. These are delayed measures: they follow memberships expiring seven to eighteen months before the reporting date. They support a finding of strong retention in the measured group, while the slower growth in total paid memberships limits the case for accelerating membership momentum.
Sources: FY2026 Form 10-K, Item 1, p. 5; Item 7, pp. 26–27; Note 1, membership-fee accounting; FY2025 Form 10-K, Item 1, pp. 5–6.
Membership fees work together with merchandise sales. Rewards earned by Executive members reduce reported net sales, and rewards still owed to members increased to $3.04 billion from $2.68 billion. Costco also held $3.01 billion of membership payments for access it had not yet fully provided, up from $2.85 billion. These advance payments provide cash before Costco records all the related revenue. Membership revenue is not pure profit: the warehouses, employees and services support both membership access and merchandise sales.
Source: FY2026 Form 10-K, consolidated balance sheets, p. 39; Note 1, Revenue Recognition and Membership Fees.
3. Profit improved, but the expense ratio overstates the efficiency gain
Costco earned more from a larger business; higher gasoline prices also lowered its reported expense ratio. Operating profit rose 12.5%, ahead of revenue growth. However, the lower share of sales spent on overhead does not establish an equivalent improvement in operating efficiency.
| Consolidated annual results, USD millions except margins and EPS | FY2024 | FY2025 | FY2026 |
|---|---|---|---|
| Total revenue, including membership fees | 254,453 | 275,235 | 303,154 |
| Operating profit | 9,285 | 10,383 | 11,685 |
| Operating profit / total revenue, calculated | 3.65% | 3.77% | 3.85% |
| Net income | 7,367 | 8,099 | 9,226 |
| Net income / total revenue, calculated | 2.90% | 2.94% | 3.04% |
| Diluted earnings per share, USD | 16.56 | 18.21 | 20.76 |
Source: FY2026 Form 10-K, consolidated statements of income, p. 37. These profit margins use total revenue. Costco’s merchandise-margin and overhead ratios below use net sales, which exclude membership fees.
Selling, general and administrative expenses—the cost of operating and administering the business—rose 8.9% to $27.19 billion. They fell from 9.25% to 9.15% of net sales. Yet management’s comparison excluding gasoline-price inflation showed a ratio of 9.26%, slightly above the prior year. Higher fuel prices raised sales dollars without a matching increase in overhead. That explains the apparent improvement in the ratio.
Costco also kept a slightly smaller share of each sales dollar after merchandise costs: 11.09%, compared with 11.12%. This is its merchandise margin, before overhead and taxes. Excluding gasoline-price inflation, management reported a margin of 11.22%, above the prior year.
The categories moved in different directions. Core merchandise categories kept 0.15 percentage points more of their own sales after merchandise costs. Warehouse ancillary operations and other businesses kept 0.14 percentage points less of their own sales.
However, gasoline, pharmacy and the other ancillary businesses grew faster, giving them a larger share of Costco’s sales. In management’s companywide comparison excluding gasoline-price inflation, ancillary operations and other businesses added 0.19 percentage points to the merchandise margin, while core categories subtracted 0.11 percentage points. Costco attributed most of these opposing movements to the change in sales mix. Higher gasoline sales also increased co-branded credit-card reward costs charged to core categories.
The two comparisons answer different questions. Core categories earned more merchandise profit per dollar of their own sales, but their smaller share of companywide sales reduced their contribution to Costco’s overall margin.
Costco pays higher wages to support employee retention and productivity, according to management. That choice also raises current costs. It increased the top of U.S. and Canadian wage scales by $1 per hour in March 2026, and its average U.S. hourly wage reached approximately $33 at year-end.
Higher merchandise costs produced a separate $206 million inventory-accounting charge, up from $142 million. For U.S. inventory, Costco generally assigns the most recently incurred purchase costs to goods sold first—the last-in, first-out method. The charge reduced reported profit to reflect higher merchandise costs; the accounting adjustment itself did not require a separate cash payment.
Source: FY2026 Form 10-K, Item 1, p. 6; Item 7, pp. 24 and 27; Note 1, Merchandise Inventories, p. 44.
Tariff refunds provided a smaller, identifiable benefit. Costco received $184 million during fiscal 2026: $174 million reduced merchandise costs and $10 million was interest income. The company spent part of the benefit on lower member prices, leaving a disclosed net merchandise-margin benefit of 0.03 percentage points. Its earnings release described the fourth quarter’s net, nonrecurring benefit as $0.15 per diluted share, after partial reinvestment. That per-share figure is already an earnings benefit after tax; the $184 million is a gross amount before price investment and tax. They should not be subtracted together from profit.
The tax rate also helped net income grow faster than operating profit. It fell to 24.7% from 25.1%. Fiscal 2026 included $83 million of separately identified research-credit tax benefits and $72 million related to stock compensation, compared with $100 million of stock-compensation benefits in fiscal 2025. Meanwhile, interest income increased to $601 million from $469 million because larger cash balances more than offset lower interest rates. Thus, not all of the 13.9% increase in net income came from selling more merchandise.
Sources: FY2026 Form 10-K, Item 7, Tariff Impacts, p. 25, and pp. 27–28; Note 8, pp. 56–59; September 24, 2026 earnings release, fourth-quarter earnings discussion. No adjusted annual net-income measure is used here.
4. Supplier terms strengthened the cash available after investment
Operating cash grew faster than profit partly because Costco sold goods faster and obtained better supplier payment terms. Costco often collects from shoppers before paying suppliers. That timing advantage expanded in fiscal 2026, reducing the cash it needed to keep merchandise on its shelves.
Operating cash flow reached $15.82 billion, up 18.6%. In the cash-flow reconciliation, inventory growth used $1,153 million, while growth in amounts owed to suppliers added $2,755 million. The net contribution was $1,602 million, compared with $963 million in fiscal 2025—an increase of $639 million. Management attributed the reduced cash tied up in inventory, after allowing for supplier credit, to faster inventory turnover and improved supplier terms.
This is useful operating funding, but it comes with bills that will be paid later. The cash improvement should therefore be understood alongside the supplier balance, rather than treated as an equivalent increase in profit.
| Cash generation and allocation, USD millions | FY2024 | FY2025 | FY2026 |
|---|---|---|---|
| Operating cash flow | 11,339 | 13,335 | 15,817 |
| Cash additions to property and equipment | 4,710 | 5,498 | 6,435 |
| Free cash flow, calculated | 6,629 | 7,837 | 9,382 |
| Cash dividends paid | 9,041 | 2,183 | 2,458 |
| Cash spent on share repurchases | 700 | 903 | 848 |
| Remainder after these payments, calculated | -3,112 | 4,751 | 6,076 |
Source: FY2026 Form 10-K, consolidated cash-flow statements, p. 41; Item 7, pp. 28–29; Note 6, p. 55. Free cash flow here means operating cash less cash additions to property and equipment. It is a calculated non-GAAP measure, before finance-lease principal payments and other financing flows. Fiscal 2024 dividends included a $6.66 billion special payment.
Other important differences between profit and cash were depreciation, which records the use of long-lived assets, and compensation paid in shares. Neither required the corresponding current-year operating cash payment. Together they added back $3.60 billion in the cash-flow reconciliation. Stock compensation still has an economic cost through the shares employees receive; section 6 examines that effect.
Tax timing also changed. The cash-flow statement added back $306 million of deferred tax expense, compared with subtracting $108 million in fiscal 2025. These entries reconcile tax expense with taxes payable in different periods. Actual cash income taxes fell to $2.84 billion from $2.92 billion. These are related views of tax timing, not two independent cash benefits to add together.
Year-end cash and cash equivalents rose by $6.05 billion to $20.21 billion after investing and financing payments. Short-term investments brought combined cash and investments to $21.30 billion. The $20.21 billion cash-and-equivalents balance includes $2.84 billion due from card transactions, which normally settles within four days. The cash-flow statement ends with that same $20.21 billion balance; it does not include the separate short-term investments or present a separate restricted-cash reconciliation.
Source: FY2026 Form 10-K, consolidated cash-flow statements, p. 41; Note 1, Cash and Cash Equivalents, p. 42; Note 8, p. 58.
Receivables outside that cash balance rose $756 million to $3.96 billion. These mainly represent money due from vendors, pharmacy insurers, credit-card partners, reinsurers and governments, rather than ordinary shoppers buying on credit. The filing does not allocate the increase among those sources. The practical issue is how quickly those parties pay, but the disclosed balances do not establish a deterioration in customer collections.
Inventories rose 6.7% to $19.32 billion, slower than sales. Supplier payables rose to $22.59 billion from $19.78 billion. Together with management’s turnover explanation, these figures support a business that expanded without tying up a proportionate amount of its own cash in goods.
Source: FY2026 Form 10-K, consolidated balance sheets, p. 39; Note 1, Receivables and Merchandise Inventories, p. 44; Item 7, p. 29.
5. The next expansion step depends on execution more than funding
Costco has the cash to increase investment; fiscal 2026 openings increased slightly but did not reach the earlier plan’s maximum. Management’s investment program buys sites and builds or improves warehouses, distribution and manufacturing facilities, and information systems. Its purpose is to reach more members and support the movement and sale of more goods.
Capital spending increased 17.0% to $6.44 billion. Costco opened 28 warehouses, including three relocations, producing 25 net additions and a year-end network of 939. That compares with 27 openings and 24 net additions in fiscal 2025.
The prior annual report had outlined spending of $6.0 billion to $6.5 billion and up to 35 openings, including five relocations. Spending landed within that range. Openings increased by one from the prior year but remained below the earlier maximum. Because “up to 35” was a ceiling, this comparison alone does not establish a missed firm target, delayed sites or construction cost overruns.
For fiscal 2027, management plans approximately $7.50 billion of capital spending and up to 33 openings, including five relocations. That would increase spending 16.6% and add up to 28 net locations. The planned spending is well below fiscal 2026 operating cash generation, while the accumulated cash balance offers additional flexibility. Funding capacity is therefore stronger evidence than the opening schedule’s certainty.
Sources: FY2026 Form 10-K, Item 7, pp. 25 and 29; FY2025 Form 10-K, Item 7, p. 29. Fiscal 2027 figures are management plans, not completed investment or forecast cash flow from this analysis.
The balance sheet already shows the building program. Property and equipment, after accumulated depreciation, increased $3.72 billion to $35.63 billion. Construction still in progress rose to $2.72 billion from $1.88 billion. Goodwill—the amount paid in acquisitions above the identifiable net assets acquired—remained $994 million, and acquired finite-life intangible assets were immaterial. The major asset expansion is in physical and operating infrastructure, rather than newly purchased acquisition goodwill.
Most spending remained in the U.S., which accounted for $5.12 billion of the $6.44 billion total. Yet profit growth was broad geographically:
| Segment, USD millions | FY2025 revenue | FY2026 revenue | FY2025 operating profit | FY2026 operating profit |
|---|---|---|---|---|
| United States | 200,046 | 219,823 | 6,878 | 7,647 |
| Canada | 36,923 | 40,561 | 1,849 | 2,107 |
| Other International | 38,266 | 42,770 | 1,656 | 1,931 |
Source: FY2026 Form 10-K, Note 1, pp. 44–46; Note 11, pp. 63–64. Segment revenue includes membership fees. The disclosed totals eliminate inter-segment sales and expenses.
The U.S. supplied $769 million of the $1.30 billion increase in operating profit. Canada and Other International supplied $258 million and $275 million. Growth outside the U.S. broadens the earnings base, but the U.S. and Canada still generated approximately 83% of operating profit. Costco remains heavily dependent on its established North American business while it builds elsewhere.
Digital investment has a competitive purpose too. Sales initiated digitally—including orders fulfilled through warehouses and Costco Travel—represented 11% of net sales and grew approximately 21% on a comparable basis. This broader measure should not be directly joined to the prior year’s narrower e-commerce growth series.
Sam’s Club is investing in the same customer need for convenience. Walmart reported 26% growth in Sam’s Club U.S. e-commerce and 6% growth in membership-fee revenue for its quarter ended July 31, 2026, with pickup and delivery supporting online growth. Those figures cover a different period and scope from Costco’s annual digital measure. They show active competition for members’ shopping occasions, rather than establish which company is winning market share.
Sources: FY2026 Form 10-K, Item 1, pp. 4–5; Item 7, pp. 24–26; Note 11; Walmart second-quarter fiscal 2027 results, August 20, 2026, Sam’s Club U.S., p. 4.
New buildings and digital services can add sales, but their effect on profit takes work. Costco says new warehouses initially earn less than established ones and can draw sales away from nearby locations. Some digital businesses also have lower merchandise margins. The useful test of the larger investment program is whether it adds profitable shopping activity after those costs, not simply whether capital spending rises.
Source: FY2026 Form 10-K, Item 7, pp. 23–24; Item 1A, expansion risks, pp. 9–10. No maintenance-versus-growth spending split is inferred from depreciation.
6. Near-term debt is manageable, and buybacks mainly offset new shares
Costco’s 2027 debt maturities are concentrated, but its cash resources are substantially larger. Borrowing principal totaled $6.18 billion at year-end. Of that, $2.25 billion falls due in May and June 2027. The rise in current debt chiefly reflects those existing notes moving closer to maturity, rather than a comparable surge in new borrowing.
| Borrowing principal due, USD millions | Amount |
|---|---|
| Fiscal 2027 | 2,250 |
| Fiscal 2028 | 0 |
| Fiscal 2029 | 136 |
| Fiscal 2030 | 1,750 |
| Fiscal 2031 | 161 |
| Thereafter | 1,878 |
| Total | 6,175 |
Source: FY2026 Form 10-K, Note 4, pp. 52–53. The balance-sheet debt amount is $6,162 million after $13 million of accounting deductions for borrowing discounts and issuance costs; lease obligations are separate.
The two notes due in 2027 carry fixed annual interest rates of 3.000% and 1.375%. The other large U.S. notes mature in 2030 and 2032 at 1.600% and 1.750%. These four series require approximately $92.7 million of annual contractual interest while all remain outstanding. That calculation excludes Japanese notes, leases and other interest items; total reported interest expense was $145 million.
Costco’s Japanese subsidiary issued approximately $500 million of notes during the year at fixed rates of 2.620% to 3.680%, maturing from 2031 to 2041. Cash proceeds were $496 million. The subsidiary raised this money while Costco’s consolidated operating cash already covered capital spending and dividends; the issuance therefore does not establish a companywide funding shortfall.
Costco also had $2.12 billion of bank borrowing capacity, with no short-term borrowings outstanding at year-end. Most facilities expire within a year, and the enlarged $1 billion U.S. revolving facility expires in August 2027. Letters of credit reduce available borrowing capacity. Renewals therefore need attention, although existing cash makes the business less dependent on refinancing on a particular date.
Source: FY2026 Form 10-K, Item 7, pp. 29–30; Note 4, pp. 52–53. The filing identifies no funding constraint from a breach of lending conditions. It does not quantify the margin available under any financial limits in its borrowing agreements.
Lease commitments add a separate claim on future cash. Recorded operating and finance lease liabilities totaled $4.02 billion, down from $4.15 billion. Minimum payments before adjusting for the time value of money were $5.82 billion, including $398 million due in fiscal 2027. A further $1.67 billion relates to signed leases that had not started and is excluded from those scheduled payments. The filing says the lease contracts impose no material restrictions on business or financial decisions. These commitments matter when judging the expansion budget even though they are not all cash construction spending.
Source: FY2026 Form 10-K, Note 1, Leases, pp. 45–46; Note 5, pp. 53–54.
Shareholder payments remained covered by internally generated cash. Costco paid $2.46 billion in dividends and $848 million for buybacks. The board raised the quarterly dividend from $1.30 to $1.47 per share in April. Repurchases retired 891,000 shares, while the net release of vested employee awards added 920,000 shares. Shares outstanding therefore rose by only 29,000 to 443.266 million.
Repurchasing and retiring shares reduces the number of shares over which future earnings are divided. In fiscal 2026, Costco’s buybacks largely offset shares issued through employee awards, leaving the year-end share count slightly higher. That is the observed effect; the filing does not identify offsetting employee awards as management’s stated purpose for the program.
The average share count used to calculate diluted earnings per share—which also includes the potential effect of employee awards—fell only 0.08%. The 14.0% increase in diluted earnings per share therefore came almost entirely from higher net income. Buybacks limited dilution but used $848 million that otherwise could have remained available for investment, debt repayment or other payments.
Stock compensation was $924 million, with another $922 million of unrecognized cost expected over a weighted-average 1.5 years. The cash-flow addback of this expense should be read together with the cash used for buybacks and employee tax withholding. Equity increased $6.64 billion to $35.80 billion, principally because the company retained much of its annual profit after dividends and share retirement charges.
Source: FY2026 Form 10-K, consolidated equity and cash-flow statements, pp. 40–41; Notes 6–9, pp. 55–60. Repurchase accounting cost was $847 million; cash paid was $848 million because settlement timing differs. Repurchased shares are retired, so there is no treasury-share balance to reconcile.
7. Refunds and legal exposures affect how much benefit Costco keeps
Tariff recoveries give Costco room to lower prices, but the cash received is not a recurring earnings stream. After fiscal year-end, it received a further $155 million of refunds. Management intends to invest the majority of refunds in better member value. Lower prices could support shopping and renewals, while limiting the portion retained as profit.
There is also a direct legal challenge to who should receive that benefit. Four class actions seek refunds of tariffs allegedly passed on to members through higher prices. One court denied Costco’s dismissal motion in July 2026, and a request for appellate review was pending at filing. The company’s pricing response and the litigation therefore concern the same economic question: how much of recovered import costs Costco ultimately keeps.
Source: FY2026 Form 10-K, Item 7, Tariff Impacts, p. 25; Note 10, p. 62. The $155 million is a subsequent receipt, not fiscal 2026 operating cash or profit.
Other cases involve employee pay and working conditions, opioid dispensing, website tracking and privacy, and product-labeling allegations. A Washington class action concerning restrictions on employees’ second jobs had a trial scheduled for March 2027. Some matters have small settlements or amounts already recorded as expected losses. For matters without a recorded loss, Costco says possible losses cannot reasonably be estimated. It does not expect a material overall adverse effect, but acknowledges that an unfavorable outcome could materially affect a quarter or year. No credible total litigation-loss estimate can be derived from the filing.
Costco also sets aside amounts for insurance claims it expects to pay itself. Those liabilities rose to $2.16 billion from $1.88 billion. They depend on past claims and estimates of future claim costs and are included within employee and other current liabilities. Higher eventual claims would require more cash than these estimates allow.
The tax balances describe two different obstacles to receiving tax savings. First, tax authorities might reject some of Costco’s tax positions. Benefits not recognized because of that uncertainty totaled $94 million at year-end, compared with $65 million a year earlier.
Second, Costco may be unable to use some tax benefits before they expire. Its valuation allowance—the amount deducted from recorded future tax benefits for this reason—was $641 million at year-end, up from $554 million. These are accumulated balances; the increase was $87 million, not a new $641 million annual charge. The allowance mainly concerns foreign tax credits and reflects savings Costco does not expect to realize, rather than an additional cash tax bill.
Net deferred tax liabilities rose to $431 million from $132 million, with differences involving property and equipment supplying the largest increase. These liabilities reflect taxes expected in later periods because accounting and tax rules recognize income and deductions at different times. They help explain why the tax cost recorded in profit differs from taxes paid during the year.
Source: FY2026 Form 10-K, Note 1, Insurance/Self-insurance Liabilities, p. 46; Note 8, pp. 58–59; Note 10, pp. 60–62. Other non-income-tax examinations have either immaterial possible losses or losses that cannot currently be estimated.
8. Costco can finance the plan; profitable customer growth will decide its success
Costco can finance its larger investment plan even as sales growth excluding gasoline-price and currency changes moderates. Companywide operating cash covered capital spending, dividends and buybacks, leaving $6.08 billion before other investing and financing flows. Higher profit and improved supplier-payment timing helped create that capacity.
The next step is to turn the larger investment budget into additional profitable purchases. The filing does not divide the planned increase between construction, digital systems and other uses. Strong renewals, higher core-category margins and profit growth in every region support the expansion effort. Slower membership and visit growth, together with gasoline’s influence on reported ratios, show why faster headline sales growth does not mean every part of the business is accelerating. Warehouse openings increased only slightly, so delivering the planned increase in locations remains an execution task.
The business assessment would improve if Costco delivers more productive locations while sustaining shopping growth and member retention without sacrificing margins. It would weaken if customer activity slows while payroll, fulfillment and construction commitments continue rising. The available cash gives management time and choice; the quality of the next growth phase depends on execution and member value.
Reporting basis:
This analysis uses Costco Wholesale Corporation and its wholly owned subsidiaries on a consolidated U.S. GAAP basis. Material intercompany transactions are eliminated. The selected Form 10-K is accession 0000909832-26-000093, filed October 7, 2026, accepted October 6, and covering the year ended August 30, 2026. Fiscal 2026, 2025 and 2024 each contain 52 weeks; the fourth quarter contains 16 weeks. Fiscal 2025 balance-sheet and fiscal 2025–2024 cash-flow comparators use the presentation in the fiscal 2026 filing.
The audited filing takes precedence over the September earnings release. In particular, final fiscal 2026 operating cash flow is $15,817 million, versus $15,825 million in the preliminary release, and investing cash outflow is $6,378 million, versus $6,386 million. The offsetting $8 million differences leave closing cash unchanged. The filing does not explain the underlying item, so no cause is assigned here.
Sources: SEC filing index; FY2026 Form 10-K, Note 1 and p. 41; September 24 earnings release, cash-flow statement; SEC XBRL instance. Reporting basis: Figures and calculations were checked against the filing’s consolidated annual statements, year-end balances and relevant notes, using their stated units and million-dollar rounding. Total revenue includes membership fees; it is not the net-sales line.
Calculation notes:
All amounts below are USD millions unless stated otherwise. Percent changes equal the newer amount divided by the older amount, minus one. Percentage-point changes subtract two percentage rates.
The following reconciliation shows why cash from operations differs from profit. Positive adjustments raise operating cash relative to profit; negative adjustments lower it. Inventory and supplier-payable changes reflect cash tied up in merchandise and bills awaiting payment. The noncash adjustments remove accounting expenses or benefits that did not involve an equivalent current-period cash payment or receipt; they do not themselves generate cash.
| Profit-to-cash reconciliation, USD millions | FY2025 | FY2026 |
|---|---|---|
| Net income | 8,099 | 9,226 |
| Depreciation and amortization | 2,426 | 2,674 |
| Noncash lease expense | 303 | 318 |
| Share compensation | 860 | 924 |
| Deferred tax adjustment | -108 | 306 |
| Other noncash adjustments | -9 | 49 |
| Change in inventory | 559 | -1,153 |
| Change in supplier payables | 404 | 2,755 |
| Other operating assets and liabilities | 801 | 718 |
| Operating cash flow | 13,335 | 15,817 |
Source: FY2026 Form 10-K, consolidated cash-flow statements, p. 41.
The remaining checks connect profit, cash and equity—the amount left for shareholders after subtracting liabilities from assets. Retained earnings track accumulated profits after dividends and the portion of share repurchases charged to that account. Paid-in capital tracks contributed share capital and share-award entries. Other comprehensive income includes currency translation changes that affect equity without passing through net income.
| What is being checked | Named inputs and calculation | Result |
|---|---|---|
| FY2026 operating-profit increase | Merchandise profit increase 2,942 + membership-fee increase 584 − overhead increase 2,224 | 1,302 |
| FY2026 investing cash outflow | Capital spending 6,435 + investment purchases 788 − investment maturities 811 − other investing receipts 34 | 6,378 |
| Closing cash and equivalents | Opening cash 14,161 + operating cash 15,817 − investing outflow 6,378 − financing outflow 3,355 − currency effect 38 | 20,207 |
| FY2026 balance-sheet equality | Liabilities 53,242 + equity 35,803 | 89,045 |
| FY2025 balance-sheet equality | Liabilities 47,935 + equity 29,164 | 77,099 |
| Closing retained earnings | Opening retained earnings 22,650 + net income 9,226 − dividends declared 2,458 − repurchase charges to retained earnings 827 | 28,591 |
| Closing paid-in capital | Opening paid-in capital 8,282 + equity-statement share compensation 929 − vested-award tax effects 361 − repurchase allocation 20 | 8,830 |
| Closing accumulated other comprehensive loss | Opening loss −1,770 + currency translation and other comprehensive income 150 | -1,620 |
| Closing total equity | Opening equity 29,164 + profit 9,226 + other comprehensive income 150 + share compensation 929 − vested-award tax effects 361 − repurchases 847 − dividends 2,458 | 35,803 |
The equity statement’s $929 million share-compensation entry and the income/cash-flow statements’ $924 million expense are different disclosed amounts. The reconciliations retain each statement’s figure; no unsupported explanation is assigned to the $5 million difference. Common stock remained $2 million. Year-end shares reconcile as 443.237 million opening shares + 0.920 million net shares released − 0.891 million retired = 443.266 million.
For operating-profit margins, the calculation is operating profit divided by total revenue: 11,685 / 303,154 in fiscal 2026 and 10,383 / 275,235 in fiscal 2025. For free cash flow, only cash additions to property and equipment are subtracted. The $220 million of capital expenditures included in liabilities at year-end and assets obtained through leases are not added to that cash-spending line. Balance-sheet movements can also differ from cash-flow movements because of noncash and currency effects.
The four large U.S. note series’ annual interest calculation is 1,000 × 3.000% + 1,250 × 1.375% + 1,750 × 1.600% + 1,000 × 1.750% = $92.6875 million. This is contractual annual interest on those series before their maturities, not a forecast of total fiscal 2027 interest expense.
Sources: FY2026 Form 10-K, consolidated statements, pp. 37–41; Notes 4–7, pp. 52–56. Financial ratios and arithmetic identified as calculated are this report’s calculations from those disclosed inputs.
This report is for information and education and is not investment advice.