Costco's Q4 Earnings: Deep Dive into Performance & Controversial Perks

Costco's Q4 Earnings: Deep Dive into Performance & Controversial Perks

For most investors, earnings season represents the culmination of each quarter. It's the six-week period when a majority of S&P 500 companies offer a detailed glimpse into their operating performance. Arguably, no better indicator exists for gauging the health of American businesses and the stock market than the operating results from its most influential players. However, not all significant businesses release their earnings within this condensed timeframe. While only a select few companies are scheduled to report their operating results this week, Costco Wholesale (COST 0.15%) stands out, poised to announce its fiscal fourth-quarter results after the closing bell today, September 25. Beyond the headline figures like quarterly revenue and earnings per share (EPS), several crucial questions and issues demand attention concerning Costco's recent quarter and future trajectory. One such issue is the introduction of a controversial new perk that has divided its 79.6 million paying members.

Costco Prepares to Unveil Key Fiscal Fourth-Quarter Results

The positive aspect for investors is Costco's generally transparent approach to reporting its operating results. The company regularly publishes monthly comparable-store sales data, enabling Wall Street analysts and investors to refine their expectations for the latest quarter. During the fiscal fourth quarter, ending August 31, 2025, same-store sales, excluding foreign currency fluctuations and gasoline price changes, experienced a global increase of 6.4%. E-commerce sales continued their upward trend, demonstrating double-digit percentage growth (13.5%). These figures are particularly impressive considering the prevailing economic uncertainty. E-commerce has emerged as a particularly compelling growth catalyst for Costco. The company has seen an increase in app downloads, with traffic driven by high-value items (such as gold bars, TVs, and laptops) and personalized recommendations. Expect Costco management to emphasize their ongoing efforts to enhance digital sales logistics to accommodate this consistent surge in demand. Investors should also closely monitor Costco's strategies for combating inflation. The core appeal of Costco warehouses lies in their value proposition. The company attracts consumers with competitive pricing on essential goods, including groceries and toiletries, frequently undercutting local shops and national grocery chains. Bulk purchasing enables Costco to reduce its per-unit costs and maintain lean margins on these popular, high-traffic items. Management commentary on the inflationary impact of potential tariffs and trade policies is also crucial. Even amidst inflationary pressures impacting Costco, the value proposition offered to paying members might be driving increased foot traffic. Perhaps the most pressing topic for Costco's fiscal fourth-quarter conference call and fiscal 2026 guidance will be statements regarding the implementation of its newest perk, which has sparked controversy among some domestic paying members.

Costco's Newest Perk: A Necessary Evil for Profit and Loyalty

Change is integral to the Costco membership experience. Over the past year, the company increased annual fees for Gold Star and Business members by $5 to $65, and Executive cardholders saw their annual fees increase by $10 to $130. Costco has also tightened restrictions on non-member purchases, requiring members to present their card or a digital QR code before entering warehouses. However, the most significant change impacting the U.S. market is the implementation of exclusive shopping hours for Executive cardholders, starting on September 2nd. While Costco announced this unprecedented change in June, it only took effect after the Labor Day holiday. Executive members now have exclusive access to the store from 9 a.m. to 10 a.m. on weekdays and Sundays, and from 9 a.m. to 9:30 a.m. on Saturdays. Unsurprisingly, this move has upset many U.S. Gold Star and Business members. However, maintaining the satisfaction of Executive cardholders is critical to Costco's overall success. Based on the company's fiscal third-quarter data, 37.6 million of its 79.6 million global paying members are Executive cardholders. These members account for 73.1% of net sales. Executive cardholders tend to be highly loyal to the Costco ecosystem and are motivated to maximize the value of their $130 annual membership fee. Even with Executive cardholders earning 2% back annually (up to $1,250) and receiving up to a $10 monthly credit on qualifying online orders exceeding $150, these incentives are beneficial for the company. Membership fees generate a substantial portion of Costco's profits and provide a financial buffer against its slim margins on groceries and other essential items. Despite ongoing criticism from some domestic cardholders, expect management to defend the decision to implement this special privilege for Executive members and potentially provide guidance on the anticipated number of Gold Star/Business cardholders who will upgrade to Executive status in the coming year. Membership renewal rates for Executive cardholders will be particularly important over the next year, considering heightened concerns about inflation and a potential U.S. recession, as well as the recent backlash Costco has faced regarding its new shopping hours policy. Understanding how Costco balances value, membership perks, and customer sentiment will be vital to assessing its long-term potential.