Costco's Q2 earnings beat reinforces its membership-fee machine

Core Insights - Costco reported a strong Q2 FY 2026 with net sales increasing by 9.1% to $68.24 billion and net income rising to $2.04 billion, or $4.58 per diluted share [2] - Total revenue, including membership fees, reached $69.6 billion, with membership fees alone at $1.36 billion, up 14% year-over-year [2] - Comparable sales increased by 7.4% companywide, with digitally-enabled sales up 22.6%, indicating a robust e-commerce performance [4] Financial Performance - For Q2 FY 2026, Costco's operating income grew to $2.61 billion, slightly exceeding analyst expectations of $4.55 EPS on $69.3 billion in revenue [2] - Membership fees for the first 24 weeks of fiscal 2026 totaled $2.68 billion, contributing significantly to overall revenue of $136.9 billion and operating cash flow of $7.68 billion [6] - The company reported $419 million in share repurchases and $1.15 billion in dividends paid during the same period, reflecting a commitment to returning cash to shareholders [6] Sales and Growth Metrics - Comparable sales excluding gas and foreign exchange were up 6.7%, with digitally-enabled sales up 21.7%, showcasing strong growth across various channels [4] - In February, net sales rose 9.5% to $21.69 billion, with total company comps up 7.9%, driven by a notable 17.9% increase in the "Other International" category [5] - The timing of Lunar and Chinese New Year positively impacted sales, contributing approximately four percentage points to the "Other International" growth [5]