3Q26 Earnings Review

Research evidence excerpt

3Q26 Earnings Review

Investment Thesis

We believe Costco Wholesale Corp. is one of the best managed, most outstanding companies in the world. Costco has built

impeccable global brand equity and benefits from its proprietary Kirkland Signature label. Given its clear and steady corporate

strategy, along with its value proposition and merchandise expertise, we expect the company to continue to enjoy traffic and sales

growth. Costco's decades of significant customer loyalty have led to consistent and strong membership renewal rates, which aidCONSUMER its steady profitability growth. Costco generated FY2025 membership fee income of $5.323 billion (~65% of its net income), up

10% through its membership base of nearly 145.2 million cardholders. We believe the company is well positioned as membership

renewal rates remain high (89.8% worldwide at the end of FY25) and expect expenses will be tightly managed in a higher tariff

environment and benefit from sales growth. We believe Costco has earned its premium valuation (43.8x FY27) and is well positionedRETAIL to maintain and potentially even expand its premium valuation. We rate the shares Buy and maintain a $1,125 price target.

Upcoming Catalysts Price Performance

■ Costco monthly sales results typically prove as catalysts. It is scheduled to report $1,400EQUITY May sales in June. Consistent monthly sales and traffic increases can serve as $1,300

catalysts. An acceleration in traffic from F3Q26 could serve as a catalyst and less

deleverage on SG&A in the next quarter would also be well received by investors. $1,200

Costco's F3Q26 earnings will be reported in August. $1,100

$1,000RESEARCH Base Case Assumptions: $1,125 Price Target $900

■ Our base case assumptions include continued healthy traffic trends and MSD comp $800