--- title: "AI to Trigger Layoffs? COST Still a Safe Haven---" type: "Topics" locale: "en" url: "https://longbridge.com/en/topics/39102851.md" description: "Global discount retail leader — $Costco Wholesale(COST.US) reported Q2 FY2026 results in U.S. after-hours today.The quarter ended on Feb 15.Overall, results remained solid, with both revenue and earnings slightly beating estimates.Momentum stayed intact.On headline metrics, total revenue rose 9.2% YoY, an acceleration vs. last quarter’s 8.3%.The pickup was aided by FX tailwinds and broadly higher precious metals and commodity prices.OP was $2.61bn, up 12.5% YoY.Margin expanded by 10 bps YoY, remaining on an improving trajectory..." datetime: "2026-03-06T07:56:02.000Z" locales: - [en](https://longbridge.com/en/topics/39102851.md) - [zh-CN](https://longbridge.com/zh-CN/topics/39102851.md) - [zh-HK](https://longbridge.com/zh-HK/topics/39102851.md) author: "[Dolphin Research](https://longbridge.com/en/news/dolphin.md)" --- > Supported Languages: [简体中文](https://longbridge.com/zh-CN/topics/39102851.md) | [繁體中文](https://longbridge.com/zh-HK/topics/39102851.md) # AI to Trigger Layoffs? COST Still a Safe Haven--- Global discount retail leader — $Costco Wholesale(COST.US) reported FY2026 Q2 results (quarter ended Feb 15) after-hours this morning. Overall, results remained solid, with revenue and profit slightly beating estimates. Highlights: **1.** Total revenue rose 9.2% YoY, accelerating from 8.3% last quarter, helped by FX tailwinds and higher precious metals and commodity prices. Operating profit was $2.61bn (+12.5% YoY). OPM improved by 10bps YoY, still on an upward trend but below the 20bps improvement expected, as most GPM gains were offset by a higher opex ratio. **2\. Comps accelerated, largely price-driven:** Overall comp sales growth was 7.4%, a notable pick-up vs. last quarter. It was mainly driven by average ticket up 4.2%, while traffic growth held flat QoQ at 3.1%. Fuel and FX added roughly 70bps to average ticket. Ex those factors, underlying ticket growth remained robust at 3.5%, with jewelry strength most pronounced on the back of surging gold prices. **3\. North America: price up, volume soft:** Ex FX and fuel, U.S. traffic grew 2.4% YoY, a slowdown of 20bps vs. last quarter. Against rising prices and frequent layoffs, U.S. middle-class spending still looks weak. **However, higher ticket led U.S. comp sales growth to accelerate QoQ.** Canada showed a similar pattern with softer traffic. Other Intl markets were the opposite, with growth more traffic-led and healthier, given lower penetration and store density and thus greater runway. **4\. Traditional retailers are speeding up digital shift:** E-comm sales grew nearly 23% YoY, further accelerating vs. last quarter. Online traffic increased by 32%, outpacing offline. **Online traffic has consistently outperformed store traffic in recent quarters,** and Walmart has also posted strong online growth. Traditional grocery/discount channels are seeing a broad acceleration in digital migration. **5\. Slower opening pace this quarter; full-year unchanged:** Costco added a net 4 warehouses this quarter, with the opening pace slightly slower (likely impacted by year-end holidays). Openings will accelerate in 2H FY, and the full-year plan remains 28. **6\. Pricing lift continues; North America renewal still slipping:** Membership fee revenue grew 13.6% YoY. Avg. fee per member rose 8.5% YoY, clearly showing price as the key driver. Paid members increased by 0.7mn QoQ, improving from last quarter’s trough but still notably below prior run-rate. Overall renewal stabilized at 89.7%, yet North America dipped another 10bps, signaling softness in middle/quality consumption. **7\. GPM up on non-retail businesses**: This quarter saw higher GPM alongside a near-like-for-like expansion in opex ratio, resulting in a modest margin uptick. Retail GPM was 11.02%, up 17bps YoY. Structurally, core merchandise retail GPM narrowed by 3bps YoY. Non-merch/ancillary businesses (e.g., food service, pharmacy, optical; plus travel bookings, insurance brokerage, consumer finance) contributed +19bps to GPM. **8\. Opex ratio expansion offset GPM gains:** The opex ratio expanded by 13bps YoY, a sizable move. The largest impact was a one-off change in liability accruals (+6bps), with HQ expenses adding another +4bps. With most GPM expansion offset by opex, OPM improvement came in slightly below expectations. Net income was $2.04bn (+13.8% YoY), still outpacing revenue growth. **Dolphin Research view:** Overall, Costco’s hallmark remains steady execution, with inflation/FX tailwinds lifting revenue growth. Margins continued to improve, albeit by less than expected, but directionally positive. **On a standalone basis, the quarter looked solid**, **and broadly beat Bloomberg consensus**. That said, **North America traffic keeps slowing, and sales rely more on price inflation** (with some product mix effects). New adds and North America renewal rates also remain soft, suggesting **relative weakness in its largest market’s middle-class consumption**. On the macro narrative, AI-driven labor replacement is accelerating, with recent layoffs such as Amazon’s tens of thousands and Block targeting a 40% headcount cut via AI. Such large-scale reductions in well-paid jobs could logically pressure Costco’s core middle-class customer base, and this risk warrants attention. Fundamentals vs. flows are somewhat diverging. AI’s rise may weigh on North America middle/quality consumption, yet the market’s preference has shifted away from AI and toward **traditional/defensive names**, driving a rebound in traditional retailers including Costco. Valuation has re-rated, with FY2026 PE back above 45x. We remain cautiously optimistic on Costco’s execution, but the potential shift from labor to compute is a key risk to monitor. Investment outcomes may hinge more on flows and multiple moves than on fundamental variance. If overall U.S. risk appetite fades and investors seek defensive exposure, the company remains a solid choice. **Detailed review below:** **I. U.S. market continues to soften; comp growth not truly improved** **1) Price drove comps higher; FX tailwinds vs. underlying ‘inflation’** On core operating metrics, **Costco’s overall comp sales grew 7.4% this quarter, clearly faster than 6.4% last quarter** and above expectations. By driver, **traffic growth held flat QoQ at 3.1%**, with **avg. ticket up 4.2% vs. 3.2% last quarter**. Fuel and FX added roughly 70bps to ticket. Even excluding those, underlying ticket growth clearly strengthened. Disclosures point to notable gold price gains, which lifted high-ticket jewelry demand and contributed most. **2) North America traffic growth keeps slowing — pressure on middle-class spend?** By region, Canada and other Intl markets saw faster headline comp growth on FX tailwinds. We focus on **underlying growth ex FX and fuel**. In the largest market, **U.S. traffic rose 2.4% YoY,** actually **slowing 20bps vs. last quarter**. With higher prices and frequent layoffs, **U.S. middle-class demand looks weak**. **Still, higher ticket lifted U.S. comp sales to accelerate** by ~50bps QoQ. Canada looked similar with softer traffic, while **newer Intl markets showed higher-quality growth, more traffic-led than ticket-led**. Within Intl comps, 2.4% was ticket-driven and 4.6% traffic-driven, and **traffic is accelerating**. Penetration and store density remain lower, offering more upside. **3) Traditional supermarkets accelerating online** Post-Covid growth lever: **Costco’s e-comm sales rose nearly 23% YoY this quarter,** further accelerating and beating expectations. The strongest category was gold/jewelry, with online traffic up 32%. Part of the strength may reflect a **recent change in online reporting scope**. Beyond owned channels, **orders via third-party platforms (DoorDash, Instacart, etc.) are now included**. **Online traffic has outpaced offline store traffic for several quarters,** and Walmart shows similarly strong online growth. This highlights a broad acceleration in digital adoption across traditional grocery/discount channels. 4) Overall, while underlying traffic growth merely held flat QoQ, revenue growth accelerated on ticket gains. **Additionally, Costco added a net 4 warehouses this quarter, with a slightly slower opening pace** (likely year-end holiday impact), **but 2H will accelerate and the full-year plan stays at 28**. In aggregate, **merchandise sales rose 9.2% YoY this quarter, a clear acceleration vs. last quarter and above the 8.5% market estimate**. **II. North America renewal keeps slipping; pricing tailwind still supports revenue** In subscriptions, **membership fee revenue was about $1.36bn,** up 13.6% YoY. Growth decelerated slightly but remains in the pricing-up phase and strong vs. prior single-digit norms. By price/volume, **avg. annual fee per member was $66,** up $1 QoQ and **+8.5% YoY**, underscoring price as the main driver. On volume, paid members rose just 0.7mn QoQ, better than the 0.4mn trough last quarter but well below the historical +1mn per quarter run-rate. **Overall renewal finally stabilized at 89.7%, but North America kept falling, down another 10bps.** The company has previously attributed weaker renewals and slower paid member adds to post-pandemic cohorts acquired via online/discount channels that are less core to Costco, dragging renewals. Combined with inflation pressure and slowing traffic growth, **North America’s quality consumption may also be a factor**. **III. GPM and opex both up; modest net margin improvement after offset** 1) Summing retail and membership, Costco delivered total revenue of $69.6bn (+9.2% YoY), accelerating QoQ and above expectations. 2) On GP and opex, **GPM increased while the opex ratio expanded almost in tandem,** yielding a small margin gain. **Retail GPM was 11.02%, up 17bps YoY,** with fuel adding about 6bps. Structurally, **core merchandise (core) GPM narrowed by 3bps YoY**. **Non-merch/ancillary** (food service, pharmacy, optical; plus travel bookings, insurance brokerage, consumer finance) contributed **+19bps to GPM**. **On a Core-on-Core basis (ex FX and product mix shifts),** **merchandise GPM increased by 22bps**. 3) Meanwhile, **the opex ratio expanded by 13bps YoY**. The largest swing was a one-off impact from liability accrual changes (+6bps), with **HQ costs** adding 4bps. Overall, with most GPM gains offset by opex, **OPM increased by 10bps YoY, below the 20bps improvement expected**. In an environment where inflation shows signs of re-accelerating, margins still improved but at a slower pace. A slightly lower tax rate (-10bps YoY) helped, with net income at $2.04bn (+~14% YoY), growing faster than revenue and OP. **** **Dolphin Research prior Costco analyses:** **Earnings reviews:** **Dec 12, 2025 review: '**[**U.S. Gov. shutdown 'victim'? Costco’s last dip?**](https://longportapp.cn/zh-CN/topics/37085664)**'** **Dec 12, 2025 Trans: 'Costco (Trans): Confident on inflation; target 30 openings a year'** **Sep 26, 2025 review: '**[**Middle class 'wilting': Costco facing headwinds?**](https://longportapp.cn/zh-CN/topics/34514601)**'** **Sep 26, 2025 Trans: '**[**Costco (Trans): 35 new warehouses in FY26; avoid price hikes**](https://longportapp.cn/zh-CN/topics/34515017)**'** **May 30, 2025 review: '**[**Trump’s tariff storm; Costco stays rock-solid**](https://longportapp.cn/zh-CN/topics/30184761)**'** **May 30, 2025 Trans: '**[**Costco (Trans): Tariff impacts likely through the year; company can manage**](https://longportapp.cn/zh-CN/topics/30189767)**'** **Mar 7, 2025 review: '**[**U.S. market swings? Costco remains 'rock-steady'**](https://longportapp.cn/zh-CN/topics/27905102)**'** **Mar 7, 2025 Trans: '**[**Costco (Trans): No clear inflation yet; watch tariff risks**](https://longportapp.cn/zh-CN/topics/27905477)**'** **Deep dives:** **Oct 15, 2024: '**[**Costco: Is the 50x luxury-like multiple a bubble?**](https://longportapp.com/zh-CN/topics/24476689)**'** **Sep 10, 2024: '**[**PDD’s idol — Costco as the retail 'ideal type'?**](https://longportapp.cn/zh-CN/topics/23774113)**'** **Sep 27, 2024: '**[**Costco: How a retail 'snail' forged 'unbreakable armor'**](https://longportapp.com/zh-CN/topics/24158771)**'** Risk disclosure and statement: [Dolphin Research disclaimer and general disclosure](https://support.longbridge.global/topics/misc/dolphin-disclaimer) ### Related Stocks - [Block, Inc. (XYZ.US)](https://longbridge.com/en/quote/XYZ.US.md) - [Block, Inc. 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