Costco (COST.US) recently held its FY26Q1 earnings call, highlighting robust digital momentum. The company reported a 24% increase in website traffic and over 40% growth in app traffic during the quarter, expressing satisfaction with the accelerating digital engagement. Management expects online sales to continue growing faster than the overall average in the long term as more members adopt digital interactions.
**Retail Media & Technology** Costco identified retail media as a significant opportunity, currently building data and technology platforms to enable large-scale personalization. Early tests across third-party websites, digital TV, and gas pump displays have shown promising results. The primary focus remains enhancing member experience and engagement, with most profits reinvested in price reductions and added member value.
**Inflation & Expansion** Food and grocery categories saw low-to-mid single-digit inflation, consistent with prior quarters, offset by deflation in produce and moderated price increases in items like eggs and cheese. Costco opened seven new stores globally this quarter, bringing its total to 923. The company plans to open over 30 stores annually, balancing domestic and international markets, with half of new locations targeted outside the U.S.
**Membership Growth** Total membership grew over 5% YoY, though the pace slowed slightly due to tough prior-year comparisons. Executive member upgrades and younger demographic adoption improved. Initiatives like extended shopping hours (exclusive early access for Executive members) and Instacart perks ($10 monthly credit) boosted engagement.
**Operational Efficiency & AI** Costco emphasized technology-driven efficiency gains, including AI applications in global sourcing, supply chains, and gas station operations. The company adopts a dual approach: enhancing member-facing tools while strengthening backend systems. New store productivity rose, with FY25 locations averaging $192M in sales versus $150M in FY23.
**Renewals & Personalization** Digital member sign-ups—typically younger with lower renewal rates—temporarily pressured overall retention. Targeted communication strategies aim to bridge this gap. Personalization efforts, such as tailored product recommendations and app upgrades (e.g., pharmacy prepay, online cake orders), are scaling but remain early-stage.
**Outlook** Costco reaffirmed its 5–10 year roadmap for 30+ annual store openings, with balanced U.S./international expansion. Inflation trends are expected to stabilize, while digital sales and retail media are poised to drive long-term outperformance.
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