Costco received $184 million in the fourth quarter of fiscal 2026 tied to tariffs imposed under the International Emergency Economic Powers Act: $174 million in refunds and $10 million in interest. Management said that was a little more than one-third of the refunds it expects in total. The company had already received a similar amount in the first quarter of fiscal 2027.
The figure that matters for investors is what Costco keeps. Net of partial reinvestment in member value, the refunds added a nonrecurring 15 cents per share in the fourth quarter. Strip that out and net income rose 12.3% and earnings per share 12.4%. The refunds and the related reinvestment lifted gross margin by nine basis points.
Reinvested, not banked
Management plans to put most future refunds back into member value, mostly through lower prices. In the fourth quarter that meant cuts across produce, meat, beverages, home furnishings and hardware. Costco has said it will report the net quarterly effect separately, so fiscal 2027 earnings could get periodic lifts from further refunds, but the size will depend on how fast and how heavily it reinvests. That makes the gap between reported earnings and underlying operating performance worth watching.
Walmart and Target
Rivals are doing something similar. Walmart said refunds boosted gross profit and operating income in the second quarter of fiscal 2027, with operating income receiving a net benefit of roughly 750 basis points after price investments. It expects to keep steering the remaining refunds toward customer experience and prices in the second half.
Target’s gain was larger. It recognized $994 million of pretax tariff refunds in the second quarter of fiscal 2026, worth $752 million in net earnings and $1.65 per share, and 3.7 percentage points on both gross and operating margin. Its full-year guidance includes about 90 basis points of operating-margin benefit from that quarter and leaves out any future refunds.
Valuation and estimates
Costco shares have slipped 2.5% over three months, against a 2.2% decline for the industry. Its forward 12-month price-to-earnings ratio is 40.59, above the industry’s 27.39 but below its own 12-month median of 45.14. The Zacks Consensus Estimate implies growth of 7.9% in sales and 10.4% in earnings per share for the current fiscal year, and 7% and 9.5% for the next. The current-year earnings estimate rose 7 cents to $22.57 per share over the past week, and the next-year estimate rose 25 cents to $24.71. Zacks ranks the stock #3 (Hold).
