By Sabrina Escobar
Costco Wholesale's 2026 is off to a better start than 2025, helping the stock recover last year's losses. The company's fiscal second-quarter results, due Thursday afternoon, could keep the rally going.
Analysts polled by FactSet expect the company will post adjusted earnings of $4.55 a share on $69.3 billion in revenue. Comparable-store sales are projected to rise by 6.3% from a year earlier.
Costco stock is up 17% this year, putting it on track to recoup the losses from 2025. Concerns over slowing comparable-store sales growth weighed on Costco's stock last year, but recent monthly improvements have reassured wary investors. The company's comparable-store sales rose 7.1% in January and 7% in December.
The improvement in comparable-store sales and potential for larger tax refunds this spring creates a "solid near-term set up for Costco," wrote Spencer Hanus, an analyst at Wolfe Research.
The long-term set up is also compelling. Analysts say Costco remains a winner in the retail space as consumers keep searching for value. And the company's balance sheet could get a boost from tariff refunds whenever those get processed. Costco filed a suit in the Court of International Trade to ensure repayment in the event that the Trump administration's sweeping tariffs under the International Emergency Economic Powers Act were struck down -- which they were in February.
"Competitively, we believe Costco would look to flow refunds back to members," wrote Greg Melich, an analyst at Evercore ISI. "Uses for 'found money' could include even sharper pricing, offsetting incremental non-IEEPA tariffs, new member sign up bonuses, additional services, and/or enhanced store labor/multichannel integration."
That said, there are still risks for the stock following the company's earnings.
Since Costco provides monthly sales updates, it doesn't issue a full-year financial outlook. Investors instead take a closer look at metrics like membership renewal rates and foot traffic growth, Melich noted.
Renewal rates have been lower than usual in recent quarters because online members -- a growing portion of Costco's new sign-ups -- renew at a slightly lower rate on average. The company has rolled out marketing initiatives aimed at encouraging renewals, and Wall Street will be looking for signs that these are working before letting the issue go.
Investors may also be disappointed if Costco doesn't deliver a special dividend this quarter. Costco's strong cash position has allowed the retailer to be extra generous with shareholders, issuing special payouts every two to three years. The company announced a $15 special dividend in December 2023 that was paid the following month. It also issued a $10 dividend in December 2020, a $7 dividend in May 2017, and a $5 dividend in February 2015. Based on that pattern, another special payout could be approaching.
Lastly, Costco remains an expensive stock. While its price to earnings ratio has come down from the highs notched last year, it still trades at about 47 times next years' earnings, well above the State Street SPDR S&P Retail ETF's 16 times earnings. That means the bar for earnings is high, and any underperformance could weigh on the shares.
Write to Sabrina Escobar at sabrina.escobar@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 05, 2026 10:09 ET (15:09 GMT)
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