Costco's Fresh Food Push Keeps Squeezing Traditional Grocers

Costco's U.S. comparable-store sales excluding fuel rose 7.2% in the fourth quarter of fiscal 2026, extending a string of quarterly improvements that began at the start of the year, the club retailer announced Thursday.

Fresh comparable-store sales climbed in the mid-single digits during the quarter, led by the bakery and meat departments, CFO Gary Millerchip said during the company's earnings call. The bakery business stood out: Costco's in-house pastry sales more than doubled during the period, Millerchip said.

The results underscore the competitive threat the warehouse club poses to traditional supermarket chains, which have posted weak or even negative comparable-store sales growth in recent quarters even as Costco has rung up brisk increases.

Grocery still fueled Costco's top-line growth, even though food comps trailed other categories. Comps for food and sundries rose in the low-to-mid single digits, driven by packaged and frozen foods, Millerchip said. Non-food categories, by contrast, recorded comps in the mid-to-high single digits during the quarter, which ended Aug. 30.

Millerchip pointed to shifting shopper preferences inside the fresh and grocery aisles. Customers have shown increased interest in protein-rich foods like meat snacks, sardines, canned tuna and chicken, he said. High-fiber goods such as edamame and granola snacks are also playing well with shoppers.

Costco also leaned on price cuts to reinforce its value positioning. The company reduced prices on certain private label items during Q4, including walnuts, Colombian whole bean coffee and black pepper. "Our goal is to be the first to lower prices where we see opportunities to do so," Millerchip said.

Pharmacy added to the momentum. Pharmacy sales rose by nearly 20% in Q4, driven by e-commerce, President and CEO Ron Vachris said during the call. Digital programs like Costco's pay-ahead service and pickup lockers helped offset pressure from reductions in the amount the federal government pays for certain medications under Medicare, Vachris added.

Fuel delivered the biggest percentage gain. Comparable-store sales for fuel jumped more than 30%, propelled by higher prices and record volumes, Millerchip said. The percentage of Costco's U.S. members buying gas at its fuel stations reached an all-time high in fiscal 2026, according to Vachris.

The quarter's headline numbers were strong across the board. Net sales rose 11.2% year over year to $93.9 billion, while net income climbed almost 15% to just under $3 billion. E-commerce sales, including transactions handled by third-party providers, grew more than 20% to over $33 billion, Vachris said.

The full fiscal year showed the same trajectory. Costco's U.S. comparable-store sales excluding fuel rose 6.6% for fiscal 2026, and net sales for the year increased 10.1% to $297.2 billion.

Costco added 10 retail locations to its U.S. fleet during Q4. The company currently operates 939 stores worldwide, 647 of them in the U.S. With fresh food, pharmacy, fuel and digital all compounding at once, the retailer's widening share of the grocery trip shows no sign of slowing.