Costco Wholesale Corporation

NASDAQ Global Select
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Bullish +75

Costco records strong results as it bulks up on protein sales

AI-generated analysis

📈 Costco reported an 11.6% increase in net sales for the third quarter of fiscal 2026, reaching just over $69 billion.

🏆 This represents the company's strongest quarter as measured by sales growth in nearly four years.

🛒 Comparable-store sales excluding fuel and foreign exchange grew 6.8%, marking the best performance since Q3 fiscal 2025.

💊 Interest in GLP-1 weight-loss medications drove demand for protein-focused products, including beef sticks and ultra-filtered milk.

🥩 Sales of packaged foods and candy led grocery growth, while lower egg prices were partially offset by protein snacks and bars.

📉 Food margins decreased slightly in Q3 as Costco invested in lowering prices on key items like beef and eggs to maintain value.

⛽ Gas stations served as a powerful draw for members, with many purchasing fuel for the first time during the quarter.

💰 Customers who use Costco's fuel stations tend to spend more overall when entering the warehouse.

🚚 The company faced higher transportation costs due to elevated fuel prices during the period.

📅 The fiscal quarter ended on May 10, with record-breaking volumes recorded in each month of the period.

👔 CFO Gary Millerchip and CEO Ron Vachris highlighted the "halo effect" of GLP-1s as a significant opportunity for CPG partners.

🛒 Grocery sales helped drive overall growth, with food and sundries comparable sales rising in the mid-single digits.

📉 Lower egg prices held back some food sales growth but were mitigated by strong performance in protein categories.

🚀 Costco's buyers are actively pivoting to capitalize on future opportunities related to weight-loss drug trends.

💡 The retailer aims to be the first to lower prices where opportunities exist to support members facing high costs.

Bullish Signals
  • Costco's net sales surged 11.6% year-over-year to just over $69 billion, marking its strongest quarter of sales growth in nearly four years.
  • Comparable-store sales excluding fuel and foreign exchange grew 6.8%, representing the retailer's best performance by that measure since the third quarter of fiscal 2025.
  • Demand for protein-focused items has exploded, with a newly introduced private label beef stick achieving tremendous volume and offering great value to members.
  • The ultra-filtered protein milk launched under Kirkland Signature has taken off significantly, capitalizing on shifting consumer preferences driven by GLP-1 popularity.
  • Grocery sales drove growth with comparable sales for the food and sundries category rising in the mid-single digits, led by packaged foods and candy.
  • Significant growth in protein snacks and bars partially offset declines from lower egg prices, demonstrating resilience in key categories.
  • Costco recorded record-breaking volumes in each month of the quarter, fueled by high consumer price sensitivity that drives traffic to fuel stations.
  • Gas stations served as a powerful draw, with many members buying fuel for the first time, and customers using fuel stations tend to spend more inside the warehouse.
  • Management is confident about future opportunities, noting that buyers are on top of the halo effect of GLPs and how CPGs are pivoting to future potential.
  • The company's strategy to lower prices on key items like beef and eggs has been effective in maintaining member loyalty despite margin pressure.
Risk Factors
  • Food margins were down slightly in the third quarter because the company invested in holding down prices for key items like beef and eggs to maintain value for members.
  • The company dealt with higher transportation costs during the period due to elevated fuel costs.
Full Analysis
Costco Wholesale Corporation reported its strongest quarterly sales growth in nearly four years during the third quarter of fiscal 2026, with net sales rising 11.6% year-over-year to exceed $69 billion. Comparable-store sales in the United States grew by 6.8% when excluding fuel and foreign exchange effects, marking the retailer's best performance since the third quarter of fiscal 2025. This growth was significantly driven by shifting consumer demand for protein products, a trend attributed to the popularity of GLP-1 weight-loss medications among shoppers. Executive leadership highlighted specific product successes in this category, including strong volume for a newly introduced Kirkland Signature beef stick and an ultra-filtered protein milk that has "taken off" since its launch. While food sales were slightly moderated by lower egg prices, significant growth in protein snacks and bars offset these declines, with the food and sundries category posting mid-single-digit comparable sales growth. The company noted record-breaking volumes across all months of the quarter, fueled by high consumer price sensitivity regarding fuel costs, which also drove increased traffic to Costco's gas stations. Regarding financial margins, CFO Gary Millerchip indicated that food margins were down slightly in the third quarter as the company invested in holding down prices for key items like beef and eggs to maintain value for members. CEO Ron Vachris emphasized that buyers are actively capitalizing on the "halo effect" of GLP-1 medications and noted significant opportunities with consumer packaged goods (CPG) partners pivoting to meet this future demand. The company expects to continue benefiting from the trend of customers using fuel stations as a draw, as these members tend to spend more overall when entering the warehouse.