Company DCF analysis file
Costco DCF Analysis
A Costco DCF should model merchandise trading, membership recognition and warehouse expansion separately. The sales denominator is large relative to operating profit, so a small margin change can matter more than a headline growth rate. Use the audited FY2026 cash figure rather than the preliminary release amount.
Revenue, expenses and profit on one annual basis
Historical Costco consolidated comparison, $ millions: FY2025 ended 2025-08-31 and FY2026 ended 2026-08-30. The latest reported observation uses the same completed annual basis shown in these columns.
| Measure | FY2025 | FY2026 |
|---|---|---|
| Total revenue including membership fees | 275,235 | 303,154 |
| Merchandise costs | 239,886 | 264,279 |
| Selling, general and administrative | 24,966 | 27,190 |
| Operating income | 10,383 | 11,685 |
| Income-tax provision | 2,719 | 3,025 |
| Net income | 8,099 | 9,226 |
Source: Annual financial statements. Annual values are reported unless a row is marked derived.
Merchandise cost and warehouse operating expense consume most of reported revenue. Membership fees are already in the total revenue row; adding them again inflates both the sales base and any implied fee contribution. Both annual periods contain 52 weeks, with a 16-week final quarter, so quarter comparisons also need the correct week count.
Membership revenue is already part of the group total
| Reported revenue, $ millions | FY2025 | FY2026 |
|---|---|---|
| Net merchandise sales | 269,912 | 297,247 |
| Membership fees | 5,323 | 5,907 |
Source: Annual business disclosures and financial notes. Annual values are reported unless a row is marked derived.
Warehouse sales and fee recognition follow different schedules. Model members, paid renewals and the service term separately from baskets and inventory. A fee collected at renewal is not a second receipt when it is recognized in revenue. For new warehouses, include their staffing and stock ramp rather than applying mature-store economics from opening day.
Reconcile reported cash before forecasting investor cash
| Measure | FY2025 | FY2026 |
|---|---|---|
| Audited operating cash | 13,335 | 15,817 |
| Cash property investment | 5,498 | 6,435 |
| Operating cash less property investment: derived | 7,837 | 9,382 |
Source: Annual cash-flow statement and related notes. Annual values are reported unless a row is marked derived.
The audited 2026 subtraction is 15,817 minus 6,435 = $9,382 million. The preliminary earnings release used a different operating-cash amount and is not the basis here. The cash remainder increased by $1,545 million, after both higher collections and more investment; it is not cash after every lease or financing claim.
Latest released full-year basis
| Observation | Period-specific evidence |
|---|---|
| Reported period basis | FY2026 full-year results, released 2026-09-24, is the latest completed reporting release used here. Both annual periods contain 52 weeks. Membership fees are already included in total revenue; adding them again would overstate the sales base. The audited annual cash figure supersedes the preliminary earnings-release amount. |
| Interpretation boundary | The latest reported period is the same completed annual basis shown above; no newer completed quarter is supplied. |
Source: official reporting for the stated period. This is the latest completed annual release at October 25, 2026, already represented in the annual columns; no separate newer quarter is invented. Later reporting must be checked before refreshing the valuation date.
Turn the statements into a DCF operating case
Forecast comparable warehouse demand, new-location ramp and membership recognition before merchandise cost and operating expense. Convert operating profit to investor cash through operating taxes, noncash costs, supplier terms, inventory and property investment. Supplier-funded stock can support cash, but its payment obligations remain. Keep lease treatment consistent between forecast cash and the subsequent debt/equity bridge.
| Driver | Evidence to carry into the forecast | Downside condition to test |
|---|---|---|
| Merchandise margin | Realized basket mix and landed cost | A small trading-margin decline offsets fee or sales growth |
| Membership economics | Paid renewal cohorts and recognized service periods | Cash renewal timing is mistaken for extra revenue |
| Warehouse expansion | Opening dates, stock, staffing and property payments | Investment and operating costs precede mature-site sales |
Compare the same revenue with a weaker merchandise margin before assuming operating leverage. Separately delay a warehouse opening while committed property and staffing payments continue. Let the cash calendar show the funding effect; no membership retention rate or margin improvement is supplied as an assumed company forecast.
Use the Costco financial analysis for the broader operating context, the company forecast to state the operating assumptions, and the DCF calculator only after defining the investor cash stream. Keep the statement definitions, reporting dates and your own assumptions visible when comparing valuation cases.
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