Virtual Meeting Takeaways: Consumer Trends Stable, Underlying Membership Trends Healthy

Research evidence excerpt

Virtual Meeting Takeaways: Consumer Trends Stable, Underlying Membership Trends Healthy

UpdateMmeaningful incremental market sales and accelerate comp growth. International

expansion will become a larger contributor over time, particularly across Asia and

Europe. While approximately 80% of FY26e openings are U.S.-based, the mix of

openings will shift to slightly over ½ in the U.S. and slightly under ½ internationally

over the coming years.

Exhibit 3: Average sales per COST warehouse as % of mature warehouses (pre-

FY17) shows rising productivity of new locations opened in recent years

2025 2024 2023 2022 2021 2020 2019 2018 2017

100%

95%

Warehouses 90%

85% Pre-2017

of 80%

%

as 75%

70% Warehouse

65%

Per

Sales 60%

Average 55%

50%

1 2 3 4 5 6 7 8 9 10

Source: Company data, Morgan Stanley Research.

5) Inflation remains manageable, as COST continues to protect member value.

Inflation has been mixed rather than broad-based, with pressures in categories like

electronics, gasoline and proteins offset by deflation in areas including eggs and

produce. Rather than passing through higher costs, COST continues to mitigate

inflation through sourcing, product redesign and its Kirkland Signature label.

Operating expense inflation also remains contained, with wage costs largely in line

with expectations under the current 3-year labor agreement and shipping costs

benefiting from long-term contracts, although transportation remains an area of

pressure.

6) Substantial runway for market share gains across both core and ancillary

categories, as COST still holds relatively low share in many categories. There are

attractive opportunities in big-and-bulky merchandise, travel services, pharmacy,

online grocery, and other membership-adjacent businesses. The company's limited-