Moving country of production
Where it makes economic sense. Country-of-origin optionality is now a buyer-room currency.
What just shifted at Costco this quarter. The tariff reset, Kirkland's next move, the categories pulling weight, and what your brand should do about it.
New global tariffs replace IEEPA for at least 150 days. Costco will reinvest any refunds as lower member prices, not hand them back. Where you make your product is now real leverage in the buyer's room.
jump to read →Kirkland Signature is the tariff-response pillar with teeth. If a KS sibling sits in your set, your spec, certifications, and pack architecture differentiation needs to be ready now.
jump to read →Personalization carousels alone drove $470M of e-commerce sales in Q2. If your PDP isn't built for the algorithmic lift, you're not in the pool.
jump to read →Costco is in early innings on digital TV, MVM amplification, personalized comms. Co-op or trade dollars sitting unspent should be deployed here before the program scales.
jump to read →Ron called it out directly. Costco is working with leading AI companies to ensure they surface in member queries. Your data needs to be clean, structured, and certified.
jump to read →Know where you sit. Pharmacy +mid 20s. Non-foods +high singles. Fresh meat +low doubles. Korea added +4% international from Lunar New Year timing.
jump to read →The business is humming. The room is harder. Tariffs, Kirkland, and digital are the three pressure points your brand needs to plan around.
Costco posted one of its cleanest quarters in memory. Comparable sales sped up, both traffic and basket size grew, and the membership engine kept compounding. Ron's read on the member has not moved. Members spend when the product brings quality, value, and newness. Your brand needs all three in the pitch.
What changed is the tone of the room. Tariffs reset midway through the quarter. Kirkland Signature shipped about thirty new items and cut member prices on several flagship SKUs by double digits. And digital is no longer a side channel: personalized carousels alone drove $470M in online sales in twelve weeks. Read the rest with that in mind.
Comp acceleration is real. Treat +7% ex-gas as the new baseline buyers expect from any category they're investing behind.
12 weeks ending February 15, 2026. February reported separately below.
Walk in with country-of-origin optionality, a KS-style cost-out story, or a sourcing alternative. A cost-up letter alone will not land.
IEEPA tariffs (the emergency-powers tariff regime from 2024 to 2025) were eliminated and replaced with new global tariffs for at least the next 150 days. This is the single most consequential shift for your brand this quarter.
Costco did not pass full tariff costs to members in the last year. The refund process from the IEEPA reversal is unclear. Costco has not committed to passing refunds back as cash. They will return it as lower member prices and better value "if and when" the refunds come.
Costco's four-pillar response is now policy. Every partner conversation should be tested against it.
Where it makes economic sense. Country-of-origin optionality is now a buyer-room currency.
Driving cost out by aggregating volume across geographies. National brand competitors are doing this too.
Where they control the supply chain end-to-end. See next section. This is the pillar with teeth.
U.S. sourcing wins on tariff exposure even when it loses on landed cost.
If you're on a tariff-exposed lane and we're in the room with the buyer, the question coming is simple. What's your plan to absorb this without raising your cost?
Volume read
Buyers will not entertain a cost-up letter that opens with tariffs and ends with a shrug. We need country-of-origin optionality, a KS-style cost-out story, or a sourcing alternative on the table before we walk in.
Items where Costco actively cut prices in Q2: textiles, bedding, cookware. If you sit in those sets, expect downward pressure on your case cost.
Highest exposure (imported, hard to re-source domestically):
Lower exposure (domestic or near-shore alternatives exist):
Refund accounting note: Don't book the IEEPA refund as revenue you'll recover. Costco's stated posture is reinvesting it in lower member prices, not a cash return.
If a KS sibling sits in your set, your spec, certifications, and pack architecture need to be built and ready before the next review.
Roughly 30 new KS items launched in Q2: crispy wings, Atlantic blackened salmon, apparel. Ron called out specific price drops by name on the call. KS is one of the four pillars of the tariff-response strategy.
The blackened salmon launch is instructive. It's a 6-count frozen Atlantic salmon, ASC-certified, oven or air-fryer ready, priced as a member-value play against premium frozen seafood brands. KS rarely enters a category just to compete on price. They enter when they can match or beat quality at 15 to 20% under national brand, then engineer cost out of the supply chain over time. Crispy wings sit in a similar play against established frozen wing brands.
| KS Item | Was | Now | Drop |
|---|---|---|---|
| Butter | $13.89 | $8.49 | −39% |
| Organic Coconut Water · 12-ct | $12.79 | $10.99 | −14% |
| Organic Seaweed | $10.99 | $9.99 | −9% |
| Italian EVOO · 2L | $29.99 | $24.99 | −17% |
KS targets 15 to 20% below national brand at equal-or-better quality. If a partner sits next to a KS sibling in the set, assume Costco is actively engineering more value out of that KS SKU.
The pitch around it: pack architecture that KS can't easily replicate. Differentiation in spec. Claims and certifications the buyer can't get out of a KS lift-and-shift.
KS suppliers are often the same manufacturers producing the national brand version. That means KS can match or beat the spec at lower cost because Costco controls the volume commitment and skips the brand marketing layer. The 15 to 20% price gap is engineered, not accidental.
Where KS has been slow to enter: high-innovation categories (premium supplements, functional beverages with proprietary actives), regulated specialty (some OTC, niche dietary), and seasonal-only items that don't justify dedicated tooling.
Defensive plays that hold up: branded ingredient partnerships (named probiotic strains, certified sourcing), unique pack formats KS won't tool for, true seasonal innovation, and category-specific certifications (regenerative, biodynamic, third-party tested).
Know where you sit on the heat map. Where you are determines the question you should walk into your next buyer meeting with.
Q2 category performance. February rolled forward in a similar pattern. Fresh kept leading, ancillary stayed the standout.
Fresh meat (+low double): Trade-up to premium cuts continues, ground beef pulling ticket because of beef-cycle inflation, household stock-up behavior persisting. Lunar New Year and Valentine's both drove basket size in Q2.
Bakery (+strong): New item velocity is the story. Beignets, seasonal pastries, and indulgence formats are items members can't easily replicate at home, which is the sweet spot for a Costco run.
Gold and jewelry (+double): Economic uncertainty plus Costco's price authority on bullion. This is a member-trust trade more than a fashion trade.
Pharmacy and food court (+double): Pharmacy benefiting from GLP-1 script volume and member health-and-wellness mix shift. Food court still anchored by the $1.50 hot dog and new menu additions pulling traffic.
Where Costco is cutting back: textiles, bedding, cookware. Seasonal pull-forward and softening member spend on non-essential home goods.
Supply chain is stable. The cost-up letter window is narrower than partners think. Move efficiency stories now, not later.
Overall inflation moderated in Q2 versus Q1. The picture splits cleanly between food categories softening and a couple of stubborn lines holding.
First to lower prices. Last to raise them. Quote it back to buyers. Cost-down conversations are easier than cost-up conversations right now.
Operating language for the room
Beef inflation likely persists another 12 to 18 months. U.S. cattle herd is at multi-decade lows; rebuilding is slow. Any beef-adjacent partner should model continued cost-up pressure on raw materials.
Egg deflation reflects supply recovery from the 2024 to 2025 avian flu cycle. Pricing is reverting to its normal range, but expect Costco member prices to settle low through summer.
Candy and confection inflation driven by cocoa staying elevated. Sugar has moderated. Partners in chocolate should expect another year of margin pressure unless they've locked forward contracts.
Dairy deflation (butter, cheese) is supply-driven and likely to persist through the year. Cost-down conversations on dairy-input SKUs will be easier than usual.
New warehouse openings cannibalize less than expected. Treat new infill openings as upside, not risk, for your placement plan.
924 warehouses globally. 28 net new in FY26. Targeting 30+ openings per year going forward, roughly half U.S., half international.
The four openings since last call: one U.S. relocation, one U.S. net new, two Canadian business centers. The bigger story is real estate creativity. LA project (residential over warehouse), parking decks, urban infill. They're cracking markets like LA and NYC by getting unconventional on site selection.
What it means for your brand: more openings mean more pallet velocity on existing programs and more room for line extensions in approved categories.
PDP optimization is a real revenue line. Personalization carousels drove $470M last quarter. Audit your content this week.
If you aren't optimizing your PDP content for Costco.com, that's a real revenue line you're leaving on the floor.
New product display pages are driving incremental .com sales plus traffic to same-day. Same-day delivery (Instacart, Uber Eats, DoorDash) is growing faster than the overall digital business.
Action: audit every partner's .com presence this quarter. Personalization is surfacing the brands with the cleanest content first.
Personalization carousels promote products with clean structured data first. The brands losing this race are losing it on basics.
Deploy co-op or trade dollars sitting unspent here. The test slots exist right now and the window will close once the program scales.
Gary noted 1,000+ suppliers already participating with media revenue growing double digits. Costco is in test mode on digital TV, targeted MVM (Member Value Magazine, the monthly print and digital coupon mailer that goes to every household member) amplification, and personalized comms.
They will reinvest the upside in member value, not pocket it as margin. Spend lifts ROS, not basis points.
Gary Millerchip framing
Translation: every dollar a brand spends on Costco retail media goes back to members as lower prices, not into Costco's own margin. The brands that win here treat retail media as an investment in their own price position, not a pure media buy.
Worth flagging to any partner with co-op or trade dollars (the annual marketing pools CPG brands set aside to spend with retail partners) sitting unspent. The test slots exist right now. That window won't stay open once the program scales.
Retail media means brands paying a retailer to feature their products inside the retailer's own channels: app feeds, dot-com search results, member emails, in-warehouse digital signage. Think Walmart Connect or Amazon Ads, but for Costco's 82M-member base.
ROS stands for return on sales, the revenue lift generated per dollar of media spend. Costco's framing is that retail media should grow the top line, not pad gross margin.
Basis points (bps) are one one-hundredth of a percent. Used in finance to talk about small shifts in margin (100 bps = 1%). "Spend lifts ROS, not basis points" means Costco is reinvesting the upside in member price, not in expanding their own profit margin.
Costco wants to be the answer when members ask LLMs. Get your structured data clean, claims certified, and content LLM-legible now.
Ron said it directly: Costco is working closely with the leading AI companies to make sure Costco surfaces when members shop via AI tools.
If a member asks an LLM "where's the best price on KS olive oil," Costco wants the answer to be Costco. The infrastructure work is already underway on their side.
What it means for your brand: any brand serious about future Costco velocity needs product feeds and structured data clean enough for AI systems to read. We can start asking about this in your QBRs (quarterly business reviews) now. Most brands haven't even thought about it.
Executive member growth is the engine. They spend more and visit more. Plan your premium-tier SKU strategy around them.
Renewal compression is mechanical, not a demand problem. Exec tier continues to scale.
Worldwide renewal sits at 89.7% (flat). The compression is structural. New digital sign-ups renew at a lower rate than warehouse sign-ups and they've grown as a share of base. Gary said expect "a few more quarters" of slight renewal drift before it normalizes.
The $10/month Instacart credit, extended hours, and other exec benefits drove 9% exec upgrade growth. Members are leaning into the exec tier hard.
Exec members spend roughly 2 to 3x what gold-star members spend annually. The exec tier growing 9% versus paid base at 4.8% means the spending mix is shifting toward higher-velocity members. Brands positioned in categories exec members over-index on (organic, premium fresh, health and wellness, electronics, travel) get tailwind from this mix.
Renewal economics: Each 10 basis points of renewal compression equals roughly $25 to 30M in annualized membership fee income. The drift is mechanical (digital sign-ups renew lower than warehouse sign-ups) and not a demand signal. Don't read the renewal dip as a warning sign for the business.
Costco takes cost out and hands it back as a lower member price. Bring efficiency stories to the room, not asks.
Reported GM +17 bps (+11 ex-gas). Core-on-core +22 bps. Pharmacy and e-com mix the total core line down despite strong category-level performance.
Gary's posture: don't fixate on one quarter's margin line. They're running the playbook. Capture efficiency, reinvest the vast majority into member price.
For buyer conversations: Costco's bias is to take cost out and hand it back as a lower member price. Bring efficiency stories.
Volume read
Core-on-core margin means comparable gross margin on core merchandise only, excluding gas, mix shifts, and foreign exchange. It's the cleanest read on whether the core retail business is gaining or losing margin. +22 bps is a positive read.
Operating margin remains industry-best at roughly 3.5%. Costco's strategy doesn't try to expand it. Efficiency gains are recycled into wages, member benefits, technology, and lower member prices.
Country of origin by SKU. If you're sourcing on an exposed lane, have a backup plan or a cost-out story ready before the buyer asks. They will.
If a Kirkland sibling lives in your set, your differentiation needs to be built and ready: spec, certifications, pack architecture KS can't easily replicate.
Six to eight high-res images, short video, structured ingredient and nutrition data, certified claims surfaced. Personalization carousels promoted $470M in Q2 alone. Clean content wins the algorithmic lift.
Whether you're running an active program or preparing to present, retail media, MVM placement, and personalized comms are all live at Costco right now. The brands gaining traction are being strategic, not opportunistic. Volume has tactical recommendations for what's working in your category. Reach out.
Costco actively cut prices in those sets this quarter. Expect a cost-down ask. Walk in with the response built, not improvised.
Let's talk about what Costco could mean for your brand, and whether Volume is the right partner to get you there.