$6.75 a Share, 15 Cents of It Tariff Refunds (Costco Q4, 24 September 2026): Margin Fell 11bp as Reported and Rose 20bp Without Gas

Costco earned $6.75 a share in its fourth quarter, up from $5.87 — but $0.15 of that was a one-off from tariff refunds, and without it the figure was $6.60 against a $6.53 consensus. Revenue of $95.7bn "beat" by about $860m, which was always going to happen because the company published its $93.9bn sales figure on 2 September. The disclosure that mattered was the one gasoline disguises: reported gross margin fell 11 basis points, and excluding gas inflation it rose 20. Shares were flat in extended trading.

What actually happened

The release, filed with the SEC as an 8-K exhibit and published on Costco's investor-relations site, answered each of the open questions this preview identified. Estimates below are LSEG figures as reported by Reuters.

Margins are calculated from the income statement: net sales less merchandise costs, divided by net sales. The reported gross margin fell 11 basis points. On the call, management said that excluding gas inflation it expanded 20 basis points — so roughly 31 basis points of reported margin were consumed by the arithmetic of dearer petrol, a larger version of the third quarter's minus-21-becomes-plus-one. Chief executive Ron Vachris described fuel as having had a "record year". Operating costs fell 27 basis points as a share of sales, partly because the same inflated denominator flatters that ratio too.

The tariff line was the one genuinely new structural item. Chief financial officer Gary Millerchip said the company received $184 million of IEEPA tariff refunds in the quarter, and Vachris said they were reinvested through price reductions on items including essentials, meat and beverages. What survived to the bottom line was $0.15 a share — roughly $67 million after tax across 444 million diluted shares. That is the distinction this preview flagged: a one-off recovery and an operating improvement look identical inside a percentage. Here the company separated them itself, and the underlying beat is seven cents, not twenty-two.

Membership behaved as the fee-increase anniversary implied. Fee income grew 7.3%, half the 14% of a year earlier, with paid members up 3.8% to 84.1 million. Renewal rates both rose ten basis points on the quarter, to 92.3% in the US and Canada and 89.8% worldwide. Fees were 48.7% of operating income.

A company that already told you

Most earnings previews are exercises in guessing a revenue number. This one is not, and the reason is a disclosure habit almost everyone else has abandoned: Costco reports net sales every retail month. On 2 September 2026 it published August sales of $23.70 billion, up 9.9% from $21.56 billion, and in the same release gave the aggregate for the 16-week fourth quarter — net sales of $93.9 billion, an increase of 11.3% compared with $84.4 billion — along with $297.3 billion for the 52-week fiscal year ended 30 August 2026, up 10.2% from $269.9 billion. The primary document sits on the company's own investor-relations site.

That single fact restructures the whole report. When a company publishes its revenue three weeks early, the earnings release stops being about revenue and becomes about everything below it — the costs, the mix, and the one revenue line that is not in the monthly sales report.

Why the "revenue beat" meant nothing

The arithmetic is worth doing slowly, because it explains a pattern that repeats across earnings season. The consensus revenue figure circulating ahead of the report is $94.85 billion, described as up about 10% from $86.16 billion a year ago. That prior-year figure is the tell: Costco's fourth quarter of fiscal 2025 had net sales of $84.432 billion and membership fees of $1.724 billion, which sum to $86.156 billion. So the consensus line is total revenue, not net sales.

Now add the disclosed piece back. Net sales are $93.9 billion. Membership fee income was $1.724 billion in the comparable quarter and grew 10.7% in the most recent quarter Costco reported. Hold the fee line completely flat — which would require membership growth to stop dead — and total revenue is roughly $95.6 billion. Let it grow at anything like the recent pace and it is nearer $95.8 billion, up about 11% rather than 10%. The actual figure was $95.723 billion, up 11.1% — inside that range, and about $860 million above the consensus that headlines then reported it "beating".

The 270 basis points between 9.4% and 6.7%

Costco publishes comparable sales twice: as reported, and excluding the effects of gasoline prices and foreign exchange. For the 16-week quarter the two sets diverge sharply.

Two things stand out. The distortion is overwhelmingly American and overwhelmingly about fuel — 350 basis points in the US against 40 in Canada. And e-commerce moves the other way, because Costco does not sell petrol online: strip the currency effect and digital sales grew slightly faster, not slower. Digital rose 20.9% across the full fiscal year, the fastest-growing part of the business by a wide margin.

The fuel effect is not an abstraction. Across the 16 weeks of Costco's fourth quarter, the average US retail price of regular gasoline was $4.236 a gallon, against $3.268 across the equivalent weeks a year earlier — a 29.6% increase, calculated from the EIA's weekly retail price series. A member who bought exactly the same number of gallons as last year contributed roughly 30% more revenue and not one cent more of anything else.

The same gallon, one line lower

This is where the preview stops being about what is known and starts being about what Thursday adds. Fuel is close to a pass-through business: the gross profit earned on a gallon is largely a fixed number of cents, set by competition at the forecourt rather than by the crude price. When the pump price rises 30%, the revenue booked rises 30% and the gross profit dollars barely move. Gross margin is gross profit divided by revenue, so the denominator inflates and the percentage falls — even though nothing about the underlying business has deteriorated.

Costco quantified exactly this on its third-quarter call. Gasoline price inflation added approximately 2.2% to reported comparable sales. Over the same period, reported gross margin was 11.04% against 11.25% a year earlier, down 21 basis points — but excluding the gas-inflation effect it was up one basis point. Almost the entire reported decline was mix arithmetic. Core-on-core margins were down nine basis points, which the company attributed to fresh food and to food and sundries.

Carry that forward. The gas-and-FX wedge in the fourth quarter is 270 basis points of comp, wider than the roughly 220 basis points of gas effect in the third. If the relationship holds, the reported gross margin line on Thursday should look worse than the third quarter's while telling you less about the business. Anyone reading the margin percentage without the ex-gas figure beside it will reach the wrong conclusion twice over.

There is a second fuel channel, unambiguously negative, and it runs through costs rather than optics. Diesel is what moves pallets from depot to warehouse. Freight and distribution costs sit in the cost of sales and in selling, general and administrative expenses, and unlike the forecourt they carry no offsetting revenue at all. A dearer gallon of diesel is simply a dearer gallon of diesel. Previews of this quarter have converged on margin rather than revenue as the open question for precisely that reason — and, separately, on the possibility that tariff refunds flatter the reported bottom line in a way the operating business did not earn. That second point connects to a mechanism we have traced before: the tariff refund that consumed 98% of the customs windfall is money flowing back to importers, and a large importer's income statement is where it lands. The same question shaped Walmart's most recent quarter.

The line that is not in the monthly report

Strip out everything Costco has already published and four disclosures remain genuinely new: membership fee income, gross margin, operating expenses, and the renewal rate. The first and last of those are the business.

In the fourth quarter of fiscal 2025, Costco earned membership fee income of $1.724 billion against operating income of $3.341 billion. Just over half of operating profit came from subscriptions. Merchandise is marked up thinly and deliberately — that is the entire proposition — and the annual fee is what converts a low-margin wholesaler into a profitable one.

That table explains why the fee line grows faster than the member count. Paid members rose 4.1%, but Executive memberships — the $130 tier rather than the $65 one — rose 9.6%. Members migrating up a price ladder generate revenue growth without any new members at all. On top of that sits the increase of 1 September 2024, which lifted Gold Star from $60 to $65 and Executive from $120 to $130, the first rise since 2017; the company said on the third-quarter call that it accounted for a little more than a quarter of membership income growth. That contribution fades as the anniversary passes — worth holding in mind when reading Thursday's fee growth against the 14% posted a year ago.

The renewal rate is the number to watch, and not because a tenth of a point matters in itself. It is the only disclosure that tells you whether a membership base assembled during a stretch of rapid growth intends to stay once the novelty and the fee increase have both aged.

What the quarter did not cover

The most important thing about this report is what it does not cover. Costco's fourth quarter ended on 30 August 2026. The first quarter of fiscal 2027 began the next day — and it contains the entire September energy move.

US retail gasoline was $4.207 a gallon in the week ending 31 August. By 14 September it was $4.455, a rise of nearly 6% in a fortnight, after drone strikes on Saudi Arabia's East-West pipeline on 10 September took a roughly 7-million-barrel-a-day artery offline. Brent settled at $105.83 and WTI at $102.43 on 16 September, with crude up more than 16% on the month even after giving some back; we traced that episode in the pipeline repair timeline. Diesel has moved further still.

So the forward-looking half of the story is the half that has not been pre-announced — and it now moves to Costco's September sales release in early October, the first monthly figure to capture the whole energy spike. Everything that made the reported quarter's optics awkward — a flattered top line, a compressed reported margin, dearer freight — becomes more pronounced in a quarter where the pump price started higher and kept climbing. The useful question is not what Costco earned in the 16 weeks to 30 August. It is what management says about the weeks since.

One clarification, since this is a currency site: none of the above is a currency event. Costco's margin will not move the dollar. But the pump price is doing two jobs at once, and the second one is macro — the same gallon that inflates a warehouse retailer's comparable sales is a line in the energy component of the US consumer price index, and a 29.6% year-on-year move in retail petrol is not a small input. Interest rates and commodities are two of the five factors behind each currency's score on the USD page. What travels between the two stories is the mechanism, not the trade.

The takeaway

Costco turned out to be as good a teaching case after the report as before it. The revenue was known and the "beat" was against a stale estimate. The headline earnings figure carried a one-off, and the company itself netted it out to $6.60. And the margin line did what the arithmetic said it would: down 11 basis points as reported, up 20 once a 30% move in petrol was stripped out. Anyone who read the first number without the second read the quarter backwards.

The general lesson travels well beyond one retailer. When a reported number and an adjusted number diverge by 270 basis points, the gap is not accounting noise to be skipped over — it is the disclosure. One of those numbers describes members buying things. The other describes the price of a commodity passing through a till.

To learn how Pip Theory builds its fundamental currency-strength scores, see the methodology overview.

Educational macro context only — not investment advice.