Costco’s 30-Warehouse Pace Changes the Math for Brands Already Inside the Club

Getting a product into Costco has always been harder than it looks from the outside. The retailer operates each warehouse with roughly 3,700 to 4,000 SKUs, a fraction of the 30,000 or more that a typical supermarket carries. That compression is a feature, not a constraint. It enables the high-velocity, low-touch supply chain that underpins Costco’s pricing model, keeps the supplier relationship intensely competitive even for brands that already have a slot, and means every item in the building has effectively displaced several competitors to be there.

Second-quarter fiscal 2026 results, reported March 5, carry implications that extend beyond a headline earnings beat. Net income rose nearly 14 percent to $2.035 billion, or $4.58 per diluted share, on net sales of $68.24 billion, up 9.1 percent from the same quarter a year ago. Total company comparable sales increased 7.4 percent. Digitally enabled comparable sales rose 22.6 percent. Those figures cleared Wall Street expectations, but the more consequential disclosures on the call concerned the pace of physical expansion, the deepening of Costco’s digital and data infrastructure, and what both developments together mean for suppliers already operating inside this channel.

The Warehouse Pipeline

CEO Ron Vachris confirmed on the earnings call that Costco expects 28 net new warehouse openings in fiscal year 2026, with a longer-term target of 30 or more annually. CFO Gary Millerchip said capital expenditures are projected at $6.5 billion for the year, covering new warehouse construction, remodels of existing high-volume buildings, and expansion of the depot network that supports operations across the system. At quarter’s end, 924 warehouses were operating globally, including 634 in the United States and Puerto Rico, with the company expecting to reach approximately 942 by fiscal year-end.

A pace of 30-plus openings annually is notable for what it signals about the state of Costco’s real estate pipeline. Historically, openings ran at a more measured clip; executing at this rate requires a substantially deeper inventory of sites in various stages of permitting, construction, and fit-out. Management acknowledged this directly, describing investment in “building a larger pipeline of new warehouses” as a specific capital priority. The supplemental presentation also referenced multi-story warehouse formats as part of Costco’s approach to accessing denser urban geographies where the traditional suburban footprint model doesn’t apply.

Each new warehouse is, in a meaningful sense, a new commercial opportunity for suppliers. Because every location carries essentially the same limited assortment, winning a SKU at Costco scales across the entire estate. A new warehouse in a Canadian suburb or a multi-story urban location in an international market draws on the same core supplier relationships. For CPG companies with products already in the building, accelerating expansion is a direct revenue multiplier. Brands working to establish a relationship with Costco’s buying organization face a parallel dynamic: the growing footprint raises the stakes on both sides of that conversation.

Digital Infrastructure at Scale

App visits rose 63 percent in the quarter. Site traffic increased 32 percent. Average e-commerce order value grew 15 percent. Digitally enabled comparable sales came in at 22.6 percent, far outpacing the 7.4 percent overall comp. Taken together, these are not the numbers of a traditional warehouse retailer reluctantly building an online capability after years of neglect.

The most specific evidence of the underlying investment came from Millerchip’s disclosure on personalization. Costco’s AI-powered product recommendation carousels, which surface individualized suggestions based on member purchase and browsing history, drove more than $470 million in e-commerce sales during the quarter. Those carousels are not generic promotional placements. Drawing on first-party membership data across 82.1 million paid members and 147.2 million total cardholders, the system combines transactional history with demographic and behavioral signals at a scale few retailers can match, operating within a membership construct where Costco knows exactly who is shopping and what they have bought before.

Vachris noted that Costco is “working closely with the leading AI companies” to ensure the retailer’s products remain visible as consumers increasingly use AI-powered tools to discover and purchase items. As AI-driven shopping interfaces gain traction, which products surface in those interfaces is becoming a commercial question with direct supplier implications, one that sits well outside the traditional domain of technology planning.

In-warehouse digital infrastructure has also advanced. Automated pay stations capable of processing pre-scanned orders in an average of eight seconds are now in pilot, alongside mobile wallet enhancements and pharmacy pay-ahead capabilities that are improving checkout throughput. Beyond labor productivity, these investments extend the digital touchpoint surface members interact with at Costco, which shapes how the retailer can engage members with product information across both physical and online channels.

What the Retail Media Build Means for Suppliers

Costco’s retail media network has grown to more than 1,000 supplier partners, according to disclosures from the Q2 call. Revenue from the program is reinvested into lowering prices for members, flowing back into the membership value proposition and away from general corporate margins. That structure is consistent with how Costco has always described the membership fee relationship, where fee income subsidizes everyday pricing. Applying the same logic to advertising revenue distinguishes Costco’s model from networks where media income primarily serves as a margin enhancement for the retailer.

The technology stack underpinning the network is unusually transparent for a retailer of Costco’s scale. At an industry event in January 2026, Costco’s retail media leadership publicly disclosed the full architecture: onsite advertising runs through a Criteo-based ad server supporting native, display, and sponsored product formats on Costco.com and the app; offsite targeting connects first-party member data to multiple demand-side platforms; measurement runs through clean room infrastructure connecting ad exposure to both online and in-warehouse transaction data. Closed-loop measurement that accounts for in-warehouse lift, not just digital conversion, produces a more complete picture of what a campaign actually moved, which is what suppliers in the club channel need to justify media investment against a warehouse model that has traditionally had no promotional shelf-space infrastructure.

Results made public are directionally compelling. A Kimberly-Clark campaign discussed on Costco’s Q4 fiscal 2025 earnings call combined the retailer’s traditional multi-vendor mailer with targeted digital ads driving traffic to product pages. Millerchip said that campaign delivered a 14-to-1 return on ad spend, a 22 percent lift in product page traffic, and a 45 percent increase in digital sales of the promoted items. One campaign does not establish a universal benchmark, and performance will vary by category, creative, and market conditions. Costco’s own stated standard for the program, as described publicly by its retail media leadership, is that advertising should function as “fuel on the flame” of an already-performing supplier relationship, a framing that makes clear the network is designed to accelerate velocity for products with proven member demand, not to manufacture interest in products without it.

The Tariff Variable

One dimension of the quarter’s results that suppliers cannot disregard is the ongoing uncertainty around tariffs. Vachris said on the earnings call that their impact “remains extremely fluid,” and Costco was among more than 1,000 businesses that filed suit seeking refunds of tariff costs paid under the International Emergency Economic Powers Act, arguing President Trump lacked legal authority to impose them. The Supreme Court subsequently overturned those tariffs, but Vachris noted that the process and timing for any refunds remain unclear. Price reductions have already reached members in categories including textiles, bedding, and cookware as some tariffs were resolved, consistent with Vachris’s stated commitment to return value to members if and when refunds materialize.

For CPG companies managing their own tariff exposure, Costco’s pricing behavior is relevant context. The retailer’s markup cap and its explicit commitment to passing savings to members mean that cost relief from resolved tariff situations is likely to flow through to prices quickly. Suppliers whose category costs shift, in either direction, should expect Costco’s buyers to factor that into product economics promptly.

The 82 Million Member Asset

Beneath all of the expansion and technology discussion sits a membership base that continues to grow and deepen. Costco ended the quarter with 82.1 million paid members, up 4.8 percent year over year, of whom 40.4 million held Executive memberships. Executive members account for 75.8 percent of total Costco sales. Renewal rates held at 92.1 percent in the U.S. and Canada and 89.7 percent globally. Membership fee income grew 13.6 percent to $1.36 billion for the quarter, partly reflecting the fee increase introduced in the U.S. and Canada in September 2024.

Executive member concentration matters for suppliers because it identifies the segment driving the majority of Costco’s volume. These members pay more for their membership, shop more frequently, and spend more per visit. Personalization infrastructure is increasingly built to engage this group at the individual level, surfacing products, offers, and content calibrated to each member’s demonstrated preferences. Reaching this segment at scale with closed-loop measurement tying ad exposure back to actual purchase behavior is a capability that did not exist inside the club channel a few years ago.

Canada’s comparable sales increased 10.1 percent in the quarter, and Other International comps rose 13 percent, both outpacing U.S. comp growth of 5.9 percent. For suppliers with international operations or ambitions, Costco’s growth trajectory outside the U.S. creates a parallel set of questions about how to support new market entries, adapt pack formats for different regulatory and consumer environments, and allocate commercial resources across a distribution relationship that is spreading geographically at a faster pace than in previous years. The international comp gap also reflects where Costco’s membership penetration model still has significant runway, which is precisely where the long-term rationale for 30-plus annual openings is grounded.

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