Costco tops Wall Street forecasts as tariff refunds flow into price cuts

Costco Wholesale reported fourth-quarter and full-year results after markets closed Thursday that beat Wall Street forecasts, with sales climbing past $93 billion for the 16-week period and the company disclosing that it had begun receiving refunds of tariffs a federal court and the Supreme Court found were collected illegally. The warehouse retailer said it is funneling those refunds back into lower prices for members rather than banking the windfall.

The results, detailed in a regulatory filing posted to the Securities and Exchange Commission's EDGAR system, showed Costco's momentum holding up even as economists warn that tariff-driven inflation and a softening labor market are squeezing many American households.

The numbers

Net sales for the fourth quarter, which ended August 30, rose 11.2 percent to $93.9 billion from $84.4 billion a year earlier. Including membership fees, total revenue reached $95.7 billion, ahead of the roughly $94.9 billion analysts had penciled in. Net income climbed to $2.998 billion, or $6.75 per diluted share, up from $2.61 billion, or $5.87 per share, in the same quarter last year. Stripping out a one-time $0.15-per-share benefit tied to the tariff refunds, adjusted earnings of about $6.60 a share still cleared the consensus estimate of $6.53.

For the full fiscal year, net sales rose 10.1 percent to $297.2 billion and net income reached $9.226 billion, or $20.76 per diluted share, compared with $18.21 a year earlier. Membership fee income, the profit engine that effectively subsidizes Costco's thin retail markups, grew to $5.907 billion for the year from $5.323 billion, as the retailer's worldwide renewal rate held at 89.8 percent across 150.4 million cardholders. A more granular breakdown of comparable-sales trends by region and channel is laid out in the supplemental financial data Costco filed alongside the earnings release, which showed quarterly comparable sales up 9.4 percent companywide, or 6.7 percent when gasoline prices and currency swings are stripped out. Digitally enabled sales, spanning the website, app and curbside pickup, rose more than 20 percent to above $33 billion for the year.

How the tariff refunds came about

The refund disclosure traces back to a February ruling. The Supreme Court held in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act does not give a president authority to impose open-ended tariffs, invalidating duties that had been collected on a broad swath of imported goods since 2025. U.S. Customs and Border Protection subsequently built a new electronic filing system, known as CAPE, to process claims from the roughly 330,000 importers who had paid the disputed duties. Costco executives said on a call with analysts that the company had received $184 million in refunds and interest during the quarter and expects more to follow as additional claims move through the CBP pipeline, according to an account of the call carried by Reuters' report on the earnings call. Chief Financial Officer Gary Millerchip said the money was steered toward products where it would have the most visible impact on prices, including produce, meat, beverages, and home and hardware goods.

Who is affected

The most direct beneficiaries are Costco's members, who the company says saw price reductions in the back half of the quarter funded partly by the refunds. Chief Executive Ron Vachris told analysts the retailer also had a record year in gasoline sales, as members leaned on Costco's discounted fuel stations, and that average basket sizes grew as shoppers consolidated errands into fewer, larger trips. Investors are watching a different variable: whether the 6 to 7 percent underlying comparable-sales growth Millerchip described as "a more normal level from here" is enough to justify a stock trading at roughly 45 times earnings. Costco shares closed the regular session at $896.48, down slightly, and were little changed after hours once the results crossed, according to trading data cited in coverage of the release, even though the headline numbers beat expectations.

A separate group with a stake in the tariff-refund story is a class of Costco shoppers pursuing litigation in federal court. A complaint filed against the company alleges Costco passed the cost of the since-invalidated tariffs on to customers through higher shelf prices and should not be allowed to keep the refunded duties for itself. Costco has moved to dismiss the suit, arguing the plaintiffs' theory does not state a valid legal claim; the motion remains pending.

Reaction

Wall Street's initial read was that Costco delivered a clean, if unsurprising, quarter. Arun Sundaram, an analyst at CFRA Research, said the results extended a pattern that has defined Costco's performance for much of the year.

"It was another well-rounded quarter for Costco, with comparable sales growth continuing to lead its big-box peers, driven by balanced traffic and average ticket growth," Sundaram said, in comments reported by Reuters following the release.

On the earnings call, Millerchip emphasized that member spending has stayed resilient despite a choppier macroeconomic backdrop. "Our members continue to show resilience in their spending, and they show a willingness to spend," he said, according to a summary of the call's highlights. He added that Costco intends "to be the first to lower prices where we see opportunities to do so," a pledge executives tied directly to how the company plans to handle further tariff refunds as they arrive.

What happens next

Costco did not issue formal financial guidance in its release, as is its custom, but Millerchip's comments about comparable sales normalizing to a 6 to 7 percent range set a marker against which the current quarter will be judged. Additional tariff refunds are expected to flow to Costco as CBP works through its backlog of claims, and executives have signaled more of that money will likely show up as targeted price cuts rather than one-time payouts to shoppers. The federal court case seeking a share of those refunds for consumers directly is still in its early stages, with no class certified and no timetable set for a ruling on Costco's motion to dismiss. Costco's next scheduled disclosure will be its first-quarter fiscal 2027 sales report, typically released in early October, which will show whether the tariff-driven price cuts translated into sustained traffic gains or simply flattered a single quarter's results.