Costco's discount therapy is working

When money feels tight, nothing soothes quite like $0.83 toilet paper chased with a $1.49 foot-long churro.

It’s no wonder that Costco’s fourth quarter topped Wall Street estimates, with sales surging 11% year-over-year to $95.7 billion, and profits climbing 15% to $6.75 per share.

Costco CFO Gary Millerchip said members are showing “resilience” in spending not just on necessities, but discretionary goodies that feel like a deal. Kirkland’s new matcha powder is flowing. Jewelry is flying off shelves, too—who can resist a diamond engagement ring for $850?

Comparable-store sales soared 9%, but the real runaway hit was digital sales—up 19.5% as more shoppers skipped those cavernous aisles and let delivery do the heavy lifting. And rather than build out its own extensive delivery infrastructure, Costco simply outsourced that hassle to DoorDash. Meanwhile, members who did trek to the warehouse filled up on gas at record levels, as rising prices tied to the Iran conflict made a Costco pilgrimage to the pump pay off like never before.

The big-box warehouse even doubled down on its budget-friendly image by pouring some of its $184 million tariff refund into price cuts on staples from produce to beverages and beyond. The company opened 28 new warehouses this past year and plans to open 33 more in 2027, part of grand plans to add roughly 30 new stores annually for the foreseeable future.

Investors clearly liked what they saw, adding Costco to their own cart and sending shares up 2.93% today.

How Costco’s winning over inflation

At a time when consumers are panicked over rising prices on everything from gas to a gallon of milk, Costco’s appeal makes total sense. The University of Michigan’s latest consumer confidence index fell to a four-month low of 48.1 in September as Americans’ expectations for their personal finances weakened by about 10%.

“The short-run outlook for business conditions plunged amid renewed worries that elevated fuel prices and re-escalating trade disputes could pass through to the economy as a whole,” survey director Joanne Hsu said in the release. Americans aren’t expecting relief anytime soon, either: Their outlook for inflation over the next year jumped from 4% in August to 4.6% in September, the highest level since June.

But no matter how hard inflation hits our wallets, the purse strings remain loose for one thing: the sweet release of a $1.50 hot dog.—JD