Costco Eyes $1.5B Tariff Refunds Ahead of Q4 Earnings

Evercore ISI has reaffirmed its Buy rating on Costco ahead of the wholesale retailer's fiscal 2026 fourth-quarter earnings release scheduled for September 24. The firm’s four-star analyst, Greg Melich, maintained a price target of $1,100, which implies approximately 22% upside from current levels. This assessment comes as Wall Street anticipates a 10% year-over-year revenue increase to $94.85 billion and a 12% rise in adjusted earnings per share to $6.55.

According to TipRanks data, the consensus among 20 analysts remains a Moderate Buy, with 15 Buy ratings, four Holds, and one Sell. The average price target across these firms stands at $1,088.89, suggesting similar upside potential. Melich’s note focuses on specific balance sheet and operational metrics rather than top-line growth, which is already largely priced in by the market.

Tariff Refunds Boost Cash Position

A central pillar of Evercore’s bullish case is Costco’s ability to reinvest U.S. government tariff refunds into its operations. Melich estimates this inflow at $1.5 billion, providing significant capital for strategic initiatives. This cash injection complements the company’s existing liquidity, with the note citing a cash balance nearing $20 billion. Such a robust financial position allows Costco to navigate a decelerating retail environment while maintaining aggressive growth plans.

The analyst also highlighted the potential for a special dividend, a move that could further appeal to income-focused investors. This outlook is supported by the company’s strong membership fee income, which reached $1.37 billion in the previous quarter. By combining operational cash flow with one-time tariff refunds, Costco is positioned to return capital to shareholders while funding expansion, a dual strategy that supports the firm’s valuation thesis.

Monthly Sales Confirm Market Share Gains

Costco’s recent operational data reinforces the view that the retailer is capturing meaningful market share. Net sales for fiscal 2026 grew 10.2% to $297.3 billion, while fourth-quarter net sales rose 11.3% year-over-year to $93.9 billion. August retail sales specifically increased 9.9% to $23.70 billion, indicating sustained consumer demand. These figures suggest that Costco is driving positive traffic even as broader retail growth slows.

Same-store sales growth of 6.7%, excluding gas prices and foreign exchange effects, further underscores the strength of the core business. Melich noted that these monthly sales confirm the company’s ability to outperform peers in a challenging economic landscape. The consistency of these results provides a solid foundation for the forward-looking expectations outlined in Evercore’s latest note, reducing reliance on speculative growth scenarios.

Analyst Consensus Reflects Stability

Greg Melich, who ranks in the top 16% of Wall Street analysts on TipRanks, brings a 54% success rate to his coverage of retailers and auto companies. His average return for investors stands at 7.30%, reflecting a track record of selective, high-conviction calls. This credibility adds weight to his specific focus on membership fees and cash deployment, distinguishing his analysis from broader market commentary. The firm’s rating aligns with the prevailing consensus, yet offers detailed insights into how Costco’s unique financial structure drives value.

With revenue and same-store sales already known, the upcoming earnings report will likely center on management’s plans for the $1.5 billion in tariff refunds and the utilization of its nearly $20 billion cash reserve. Investors will scrutinize whether these funds lead to immediate shareholder returns, such as dividends or buybacks, or are allocated toward long-term capital expenditures. The clarity of Costco’s financial position provides a tangible basis for the 22% upside implied by Evercore’s target, grounding the investment case in concrete balance sheet strength rather than speculative momentum.