COST · Q4 2025 Earnings

Q3-2025 anchor: Tariff vigilance, hour-by-hour pricing → Q4-2025 anchor: Tariffs largely managed, offensive expansion mode.

The single biggest shift quarter-over-quarter is the framing of tariff risk. In Q3 Ron Vachris described watching pricing "daily and if not hourly on every key commodity," and Gary Millerchip walked through LIFO mechanics with explicit conditionals about inflation paths. This quarter the framing is: "We largely feel like we've worked through the strategies that we needed to mitigate what we see in front of us today." That's not victory-lap language — management still flags "macroeconomic uncertainty" — but the operational posture has clearly moved from defensive scenario-planning to executing a positioned playbook. The Q3 LIFO and CapEx point estimates were both closed out cleanly this quarter — LIFO came in at $43M, inside the $40–50M range, and CapEx finished at "a little under $5.5B" versus the "a little over $5B" guide, with the overage explicitly attributed to investments supporting the accelerated FY26 opening cadence and incremental remodel spend.

Warehouse expansion is where the offensive posture shows up in numbers. The FY26 plan of 35 openings (5 relocations) compares to 27 gross / 24 net in FY25 — a roughly 30% step-up in unit growth despite the macro caveat. Combined with the language "we continue to see significant opportunities for expansion both domestically and internationally," management is signaling that the capital deployment cadence is accelerating, not pausing, into FY26.

The discretionary-mix commentary is a tone shift in a different register. Last quarter the holiday assortment discussion was conventional; this quarter Ron described actively thinning the traditional holiday SKU set to bring in non-traditional high-ticket items: "we're bringing in backyard sheds in the fall, which are doing very, very well for us... we never had the ability to do that, due to space restraints." This is a merchandising team that's willing to break the seasonal rhythm to chase ticket. Read as a confidence signal about member spending capacity.

The disclosure framework is changing too. Management announced that starting with the September sales release, the e-commerce comp will be replaced by a "digitally enabled" comp incorporating same-day delivery and adjacent services — FY25 digitally enabled sales totaled "more than $27B." The 13.6% e-commerce comp this quarter is the last apples-to-apples print under the old definition. Investors should expect the headline digital growth number to look different next quarter, by construction.

Renewal rate framing is the one explicitly cautious thread. Management reiterated that the digital member mix carries lower renewal propensity and "we would therefore expect to continue to see a small decline in our renewal rate as this change in membership mix gets fully reflected." The bull case is the engagement investment closes that gap; the bear case is structural.