Do not expect a check
Like last quarter, the money will likely come back as lower member prices and better value, not cash. Do not model it as revenue you will recover.
The gas quarter. Record volumes, refund mechanics on tariffs, an AI search inflection point, and a Google retail-media partnership your brand needs to understand this week.
Cheap gas pulled a wave of first-time members into the lot. About half walk inside on the same trip. That is a fresh, loyal audience for the next two quarters, and your pallet on the floor is what catches them.
jump to read →Costco is clawing back the 2024 to 2025 emergency tariffs. Members get it back as cheaper member prices over the next few months. Do not budget it as cash you will recover.
jump to read →Energy drink, protein milk, popcorn, dog food. And Kirkland cut its new wings $2 in two quarters. If a Kirkland version lands next to you, have your difference ready before the next review.
jump to read →Costco's AI search is still small but converts better than anything else they have. It rewards clean photos, real specs, and member reviews, not keywords. Time to fix your pages.
jump to read →Costco ad space used to be hard to get into. Now your media agency can buy it the way they already buy Google. Worth a small test before the holidays.
jump to read →The weight-loss-drug wave is pushing protein, fiber, and magnesium. The surprise is self-care: saunas and massage chairs up almost 50%. Buyers want both stories now.
jump to read →On paper, a clean quarter. The real story is gas, and it is quietly handing Costco a wave of new, loyal members.
Costco had another strong quarter. Sales up 11.6%, comparable sales up 9.8%, profit per share up 15%. But the shape of it is different from last quarter. Costco splits each quarter into three four-week blocks, and all three set all-time gas-volume records. The last five weeks were the five biggest gas weeks in company history. Gas ran through almost everything said on the call.
For your brand, the point is not gas margins. It is who pulled into a Costco pump for the first time this quarter, how loyal they become, and what they buy inside on the way out. Costco's own read: first-time gas members start visiting more, spending more, and renewing more. Treat this gas surge as a flood of new members, not a fuel story.
Three other things moved this quarter, and we break down each below. The 2024 to 2025 emergency tariffs got struck down, and Costco has started getting that money back, which should change how you plan 2026 promo spend (Section 04). AI search jumped from a thing to watch to a thing to invest in, with the best conversion rate of any way people reach Costco online (Section 08). And a new ad partnership with Google and YouTube cracked open a door that has been mostly shut to brands until now (Section 09).
Every line looks healthy. Just remember gas is inflating most of these numbers.
12 weeks ending May 10, 2026. Gas is the biggest reason most of these numbers look as big as they do.
First-time gas members are a captive audience. Whether you are on the steel they walk past next is what turns them into your buyer.
Middle East supply trouble pushed pump prices up everywhere. Costco widened its price gap, and members rewarded it with the biggest gas volumes in company history.
When pump prices spiked, a lot of members filled up at Costco for the first time. The gas team is running several deliveries a day at many locations just to keep up. Costco's read was blunt: members who buy gas there visit more often, spend more inside, and renew at a higher rate.
And gas-pump visits are not even counted in that +2.4% traffic number. Real foot traffic is bigger than the headline.
A first-time Costco gas member is a captive audience. They scan their card to fuel. They sit in the lot for a few minutes. About half walk inside on the same trip. The other half come back next month already believing Costco saves them money.
The brands that win them over the next two quarters are the ones already inside the warehouse on those follow-up trips. That means a strong presence on the floor, a demo when you can get one, and a Costco.com page that shows up when these new members start searching at home.
The gas team performed exceptionally well to manage this unprecedented demand which requires multiple daily gas deliveries to many locations. We believe this will drive even greater loyalty with these members in the future.
Ron Vachris · CEO
One more thing worth watching. Gary noted members are topping off between fills because they are worried about tomorrow's price. That changes how often they come in and what ends up in the cart. Buyers will be reading those new patterns for a while.
The refunds come back as lower member prices, not a check. Do not put them on your P&L as money you will get back.
Costco has started filing to recover the IEEPA tariffs (the 2024 to 2025 emergency tariffs that were struck down) with US Customs. The filings roll out over several months, and each refund lands two to three months after it is approved.
Ron repeated the promise from last quarter with one catch. Costco plans to give members back the tariff costs it had passed on to them. How much, and how soon, depends on three things. How much money comes back. When it lands. And how an open lawsuit over the refund process shakes out.
Like last quarter, the money will likely come back as lower member prices and better value, not cash. Do not model it as revenue you will recover.
Filings go in over months. Each approved refund lands two to three months later. Expect a slow drip of lower prices, not one big drop.
Gary flagged rising plastic (resin) costs starting to hit. Anything with plastic, polyester, or cotton is on a rising-cost path, and memory-chip prices are already pushing electronics up.
Ron said it again, and Gary gave four real examples this quarter (see the Kirkland table below). If your category has a cost-savings story, buyers are listening.
If a Kirkland version now sits in your set, have your differentiation built before the next buyer review.
Kirkland keeps entering categories at 15 to 20% under the national brand, at equal or better quality. This quarter leaned into protein, drinks, and pet, and the dog food is the most strategic of the four.
KS Energy Drink is the one to watch. Energy is one of the few categories still growing on its own, not just riding the protein wave. A Kirkland version at a value price puts direct pressure on the big energy brands in your set.
KS Ultra-Filtered Milk is the protein play. Gary said anything protein is selling huge right now, and the new KS Beef Stick is proof. Kirkland is chasing every high-protein category it can find.
KS Oven Roasted Chicken Dog Food is the quiet one. Pet food takes up expensive floor space and keeps very loyal buyers, so a Kirkland entry here is a long-term land grab.
| KS Item | Was | Now | Drop |
|---|---|---|---|
| Crispy Wings | $16.99 | $14.99 | −12% |
| Milk Chocolate Almonds | $19.99 | $18.99 | −5% |
| Golf Balls | $32.99 | $29.99 | −9% |
| King Size Sheets | $89.99 | $79.99 | −11% |
The wings cut is the one to study. Kirkland launched Crispy Wings last quarter to go straight at premium frozen wing brands, then cut the price 12% within two quarters. That signals confidence in their supply and a willingness to give up margin to take share. If Kirkland enters your frozen lane, expect the same.
Protein is the rocket. Self-care is the second wave. Buyers want to hear both stories right now.
Q3 sales growth by department. Pharmacy and gas led. Non-foods and fresh both held strong. The two themes worth your attention: protein and self-care.
Ron and Costco's head merchant, Sarah, spent the quarter meeting big CPGs about the GLP-1 halo (the way weight-loss-drug users change what they eat). The categories pulling are anything protein-forward, plus fiber and magnesium. Beef sticks, protein bars, protein snacks, protein milk. The national brands are pivoting hard, and buyers are actively looking for partners with a real protein story.
Self-care inside non-foods is the second wave. Saunas, massage chairs, fragrance, hair, skin. Members will spend on higher-end self-care when the quality and value are there. If you have a premium SKU with a real quality story, now is the time to test it.
Costco will turn a cost saving into a lower member price faster than you would think. Bring the math, not the complaint.
Costco gave back a sliver of margin on core goods (9 hundredths of a percent) to lower prices on fresh and packaged food. It was a choice, not a scramble. Gary was direct: an accounting tailwind gave them room to widen value.
The moves we made on pricing were strategic, not reactionary. We're getting into lower cost goods quicker and lowering prices for our members. First to come down, last to go up.
Ron Vachris · CEO
The signal for your brand: this posture is here to stay. If your category has a real cost-savings or tariff story, buyers will turn it into a lower member price faster than you expect. Bring the math.
The pages you tuned for keyword search are about to be judged on photos, specs, and reviews instead. Audit them now.
Site and app traffic up 37%. Personalized "you might also like" carousels drove 3x the usual conversion. AI search grew triple digits and converts better than any other way people find Costco online.
The AI search story is the one that matters most for your brand. Costco is rewriting product pages so AI assistants can actually read them. Ron's example: search a tire on Google and you see a sticker price. Ask an AI and it reads the whole deal, install, road hazard, nitrogen, all in. The full value finally shows up in the answer.
For your SKUs, the Costco.com PDPs you spent two years tuning for keywords are about to be graded on different things: six to eight sharp photos, certifications shown, clean ingredient and nutrition data, and video if you have it. AI search is still small in raw numbers, but it converts better than anything else they track.
Same-day delivery expanded to Spain and France this quarter. In the US it averages under 45 minutes with a 4.8 out of 5 rating. It is growing faster than online overall and skews to the highest-spending members.
Treat any Costco ad spend as both advertising and a boost to your own price position inside Costco. The ROI math here is different.
This quarter Costco launched a partnership with Google Commerce Media and YouTube. Gary called it "a significant milestone on our journey towards increasing our share of retail media revenue."
For brands, this matters because Costco's ad space has always been smaller and harder to get into than Walmart or Amazon. The Google and YouTube tie-up opens paths your media agency already knows how to buy.
Launching this partnership will make it easier for brands and agencies to collaborate with Costco retail media. The lens is always member experience first. How does this help us deliver more relevant value, and how can our CPG partners participate in that?
Gary Millerchip · CFO
Here is the part nobody says out loud: Costco pours 80 to 90% of the extra ad money back into lower member prices. So treat any ad space you buy here as both a media buy and a boost to your own price position inside Costco. That makes the ROI math different from Walmart and Amazon.
Three things to do before the holiday push: (1) audit your Costco.com PDP for AI search, (2) test a small ad buy through the new Google partnership to learn the targeting and reporting, (3) line up your messaging with the personalized-carousel pattern that drove $470M last quarter. Volume can help on all three. Reach out.
The 41 million executive members spend more and visit more, and premium "treat" SKUs converted at 3x in the personalized carousels.
82.9 million paid members. 148.5 million cardholders. 41.2 million on the executive tier. Renewals leveled off as the newer digital-signup members matured and retention campaigns made up for their slightly lower rate.
Strip out last year's fee increase and currency swings and membership income grew 7%. That is the real underlying rate. Gary called 4 to 5% member growth "normal" when there is no big new market opening. Bigger jumps need a new country (Japan, China) or a one-off like the COVID surge.
The executive program launched in China this quarter and is running ahead of plan. China, Korea, and Japan are the big Asia lanes. Europe has the longer runway: France is young, Spain has openings coming, and the UK has been the standout over the past three years.
What it means for your brand: executive members spend more and visit more, and the personalized carousels increasingly favor them. If you have a premium or "treat yourself" SKU, this is the group that converted at 3x this quarter.
When a new warehouse opens nearby, sales in the surrounding warehouses bounce back fast. Watch your placement near new locations.
Costco opened 4 net new warehouses this quarter (three US, one Canadian business center). It now expects 26 net new for the year, two fewer than last guidance, with those two slipping to next year. Capital spending is running about $6.5B for the year.
Two relocations are done this year, with one more coming in Q4. The pattern is steady: small older buildings (often legacy Price Club sites in the Northeast) move to bigger lots with more parking and larger gas stations. The trigger is sales outgrowing the building, not a set dollar figure. And when a new warehouse opens nearby, the surrounding warehouses recover their sales quickly.
Priority order from the call:
Gary noted they would need a bigger cash pile than last time to deliver a similar special-dividend yield, since the stock is so much higher now. Nothing announced. The board is still weighing it.
Margins are stable to slightly better on the cleanest measure. This quarter's dip was a deliberate price investment, not a problem.
Headline margin down 21 bps. Strip out gas and it was up 1 bp. Core goods down 9 bps, a deliberate price investment. Overhead better by 20 bps. The overall posture did not change.
Gary repeated last quarter's framing: Costco looks at margin as a whole, and excluding gas. The cleanest read, the ex-gas trend over the last one to two years, is stable and slightly improving. This quarter fit right in. The small dip on core goods was a price investment they could afford thanks to an accounting tailwind.
The trajectory of our gross margin rate excluding gas inflation has generally been stable. A slight improvement in the mid-single-digit range. Q3 was very much in line with that trajectory. We had the capacity to invest more in value because of what we were cycling.
Gary Millerchip · CFO
On overhead, core operations got more efficient as sales grew, but higher healthcare costs and a couple of one-time legal settlements ate most of that gain. The basic pattern, mid-single-digit sales growth creating a little overhead efficiency, is intact.
Core-on-core margin is the margin on Costco's main merchandise only, stripped of gas, product mix, and currency. The 9 bps dip reads as Costco choosing to lower prices on eggs, beef, and gas, not a margin problem.
LIFO (last-in, first-out) is an inventory accounting method. A smaller charge this year ($44M vs $130M last year) added back 14 bps of margin and gave Costco room to invest in price.
Mix shift means faster-growing parts of the business (gas, online, pharmacy) carry different margins than core goods, which is why the reported number looks softer than the core read.
About half of gas visits turn into a same-trip warehouse visit, and first-time gas members stay loyal over the next two quarters. A demo, an end-cap, and a clean Costco.com page matter more right now than they did last quarter.
Six to eight sharp photos, a short video, clean ingredient and nutrition data, certifications shown, and the all-in value (delivery, install, warranty) spelled out. AI search grew triple digits this quarter and converts better than anything else. It is no longer graded on keywords.
This quarter's launch makes Costco ads easy for your existing agency to buy. Run a small test before the holidays to learn the targeting and reporting. Volume can structure the buy and line up your messaging with Costco's personalized carousels.
Ron and Sarah are actively meeting CPGs about the GLP-1 halo. The categories pulling are anything protein-forward, plus fiber and magnesium. The big nationals are already pivoting. If you have a SKU in this space, the next 90 days are the window.
Gary flagged rising plastic (resin) costs hitting non-food goods. Anything with plastic, polyester, or cotton is on a rising-cost path. Buyers will not accept a price-increase letter that opens with raw materials and ends with a shrug. Bring a sourcing option or a manufacturing-efficiency story.
Energy drink, ultra-filtered milk, sea salt popcorn, oven roasted chicken dog food. If a Kirkland version is now in your set, have your spec, certifications, and pack difference ready before the next buyer review. Same playbook as last quarter's wings and salmon.
Saunas and massage chairs grew nearly 50% this quarter, and fragrance, hair, skin, and small appliances were all strong. Members will splurge when the quality and value are there. If you have a premium SKU and the story to back it, this is the moment.
Let's talk about what Costco could mean for your brand, and whether Volume is the right partner to get you there.