Key Highlights

  • About 15 cents of Costco's $6.75 Earnings Per Share came from one-off Tariff refunds.
  • Growth in Costco's membership fee revenue, a core profit driver, slowed during the quarter.
  • COST slipped in premarket trading before turning around to close higher on the S&P 500.
  • Excluding the tariff-refund boost, earnings would have been much closer to the $6.53 consensus estimate.

Costco's fiscal fourth-quarter earnings beat got a lift of about 15 cents a share from tariff refunds, while growth in its prized membership fee Revenue slowed, yet the stock still closed higher.

A Beat With an Asterisk

On the headline numbers, Costco Wholesale's fiscal fourth quarter was a clean win. Revenue came in at $95.72 billion against estimates of about $94.88 billion, and earnings per share reached $6.75, ahead of the roughly $6.53 Wall Street expected. Comparable sales were strong.

Look a little closer, though, and the picture has more texture. About 15 cents of that $6.75 came from tariff refunds. And growth in membership fee revenue, the steady income stream at the heart of Costco's Business model, slowed. COST slipped in premarket trading as investors digested those details, then turned around to close higher on Friday, September 25, among the gainers in the S&P 500.

What Tariff Refunds Mean for Earnings

Tariffs are taxes paid on imported goods. When a company pays tariffs and some of those payments are later refunded, the money flows back into its results, boosting profit for that period. The key point for investors is that such refunds are typically one-off in nature. They do not reflect the underlying strength of the business, and they may not recur in future quarters.

Analysts often adjust for items like this when judging earnings quality. Strip out roughly 15 cents and Costco's quarterly profit would have been much closer to the consensus estimate of about $6.53, though still on the right side of it. That is why the refund detail drew attention even in a beat.

Why Membership Fees Matter So Much

Costco, headquartered in Issaquah, Washington, runs a simple but powerful model. It keeps prices and product margins low, and earns a large share of its profits from annual membership fees. Those fees are highly predictable, because members tend to renew year after year.

That makes membership fee revenue one of the most watched lines in the report. Slower growth there naturally prompts questions, and investors will want to understand what is driving it. It does not by itself signal trouble, but for a stock that trades at a premium valuation, investors want to see this engine humming.

Why the Stock Still Rose

Buyers ultimately looked past the asterisks. Costco's chief financial officer said members are "very resilient" and willing to spend on discretionary items. That commentary carries weight at a time when the University of Michigan's final September consumer sentiment index fell to 48.1, a four-month low, and gasoline sits near $4.50 a gallon.

Strong comparable sales suggest shoppers are still coming through the doors and filling their carts, a sign that Costco's value proposition resonates when household budgets are stretched.

The S&P 500 gained 39.28 points to 7,743.41 and posted a weekly gain. The Dow jumped 478.64 points to 51,828.62, ending a three-week losing streak, and the Nasdaq Composite added 129.34 points. Oil slid after Iran's foreign minister proposed reopening the Strait of Hormuz, while the 10-year Treasury Yield touched its highest since 2007 before easing.

On trade, the Xi Jinping state visit ended with limited outcomes but no immediate tariff escalation, a relevant backdrop for any retailer with tariff exposure.

What to Watch

Investors will watch Costco's upcoming monthly sales updates, when released, and future quarters for membership fee trends and any further tariff-related items. Monday's USTR release on agreements with China covering agricultural products and medical devices will be read for trade signals. Next week's PCE price index, ISM manufacturing, JOLTS and nonfarm payrolls will round out the picture of the US consumer and economy.