Costco Wholesale Corp (COST) reports fiscal 2026 first-quarter earnings after the bell Thursday, and investors aren't just looking for the usual sales numbers. They want to hear what management has to say about tariffs and whether the company's legendarily thin margins can survive in a high-cost environment.
The Numbers Everyone's Watching
Wall Street expects Costco to post first-quarter revenue of $67.17 billion, a healthy jump from $62.15 billion in the same period last year. Earnings per share should climb to $4.28 from $3.82. Those aren't bad numbers by any stretch.
The problem? The stock has basically flatlined. Shares are trading essentially unchanged Thursday morning and remain down year-to-date. Analysts have noticed—Costco has "virtually gone nowhere this last year," and right now it's hovering near its 52-week low of $871.09.
The fourth quarter looked solid with comparable sales growth hitting 5.7%, but recent data has cooled some enthusiasm. JPMorgan analyst Christopher Horvers recently cut his price target to $1,025 while maintaining an Overweight rating, noting that November U.S. core sales came in "softer than expected." Meanwhile, Telsey Advisory Group's Joseph Feldman kept an Outperform rating with a $1,100 target, praising Costco's execution despite headwinds.
The Tariff Problem Is Real
Here's where things get interesting. Costco recently filed a lawsuit in the U.S. Court of International Trade challenging new tariffs, and it's not hard to see why they're worried.
Most retailers operate with gross margins of 30% or higher, giving them cushion to absorb cost shocks. Costco doesn't have that luxury. The company caps markups at roughly 14% for brand-name goods and 15% for its private-label Kirkland Signature products. That's the secret sauce behind the value proposition—but it's also a massive vulnerability.
When tariffs hit, Costco can't just eat the cost. There's no margin buffer. They have to pass it directly to members, which undermines the whole reason people shop there in the first place. Imported discretionary goods like electronics and apparel are especially at risk, and that's a big chunk of what makes a Costco membership worth having.
Technical Picture Looks Rough
From a technical standpoint, things aren't pretty. Costco is trading about 4.5% below its 50-day moving average of $917.68 and roughly 8.6% below its 200-day moving average of $958.94. When a stock sits below both key moving averages, it usually signals a lack of buying interest.
Market data shows an interesting split: Costco has a weak momentum score of 21.89 but a robust growth score of 94.88. Translation: great business fundamentals, lousy stock performance.
What to Listen For
Thursday's earnings call will almost certainly feature questions about tariffs and how management plans to navigate the margin squeeze. Can they maintain their value proposition if costs keep rising? Will they lean harder on membership fees to offset pressure on product margins? These are the questions that matter more than whether they beat estimates by a few cents.
Costco shares were up 0.14% at $875.87 at the time of publication Thursday.
